Update - Goldman's $500 Million Controversy

There were quite a few articles over the weekend that addressed Goldman Sachs' 10,000 Small Businesses program and the backlash that it has induced. Below, I've summarized a few that I found particularly interesting.

Before we turn to the articles, though, I want to point out one thing. I noticed an important line in a Financial Times article, which said, "Goldman stressed that the small business drive had been planned for a year." I'm not sure if or how that changes the discussion of whether this is a good strategic CSR initiative, but it's a useful piece of information to add into the conversation.

$500 Million is just "Crumbs from its (Goldman's) table."
The New York Times published an editorial entitled "Goldman's Non-Apology". The editorial criticizes what it argues are Goldman's contributions to causing the current recession, as well as what it sees as Goldman's unwillingness to acknowledge that it needed the government's bail-out money and that it thus isn't true that "taxpayer dollars have not helped to generate its post-crash profits." The piece goes on to address the 10,000 Small Businesses program, calling the $500 million pledge "crumbs from its table". It says, "It is hard to take seriously Goldman's claim that the program was not motivated by its public relations problems. The money will be welcomed by the recipients, but if Goldman wants to make a meaningful contribution, it would have to be in the billions and aimed more directly at taxpayers." Instead, the editorial suggests, Goldman should make "A multibillion-dollar gift to the federal Bureau of the Public Debt, which accepts tax-deductible donations to reduce the national debt."

Goldman's recent "exercise is so sequenced and packaged that it's bound to come across as disingenuous", but ultimately, the company "exists solely to make profits for its employees and shareholders."
The Wall Street Journal blog Mean Street, written by Evan Newmark, takes a very different stance, in a post entitled "Mean Street: Don't Apologize for Anything, Goldman Sachs". According to Newmark, the reason the general public is angry at Goldman is simple: "In an economy full of losers, everyone is fixated on hating the winner." He goes on to argue that the 10,000 Small Businesses initiative, along with Lloyd Blankfien's apology (quoted in the NYTimes editorial, if you want to see the exact language), "...is so sequenced and packaged that it's bound to come across as disingenuous, even deeply cynical." However, ultimately, Newman thinks that the public is coming down too hard on Goldman: "And here's the really unfortunate aspect of your current predicament: it's undeserved. Sure, there was some clumsy PR out of Goldman over the past year. But I still can't figure out why and to whom you're apologizing." Furthermore, he says, "...you're apologizing because nobody can handle the real truth: Goldman Sachs exists solely to make profits for its employees and shareholders. The rest is just PR."

"The bankers may have to give up more yet - and not only by writing a check."
A separate article New York Times article - "Wall Street's Spin Game," by Graham Bowley - gives Goldman Sachs advice on how to confront its current public relations challenges (which go beyond the Small Businesses initiative). Among the tactics he recommends is, "Give Back Some Money." However, he warns, "...there is the risk that such a strategy will be seen as a transparent ploy to buy off public opinion. Goldman's donation was only about 3 percent of the $16.7 billion the bank has so far set aside this year for its bonus pool. The bankers may have to give up more yet — and not only by writing a check." Instead, he advises (quoting Howard J. Rubenstein, president of communications firm Rubenstein Associates), the company should make it "mandatory" for its "brilliant staff" to volunteer in ways that have "real impact". (It's not particularly relevant here, but I really liked the advice to "Show you create real products that benefit people." Actually, that is relevant - ultimately, isn't CSR broadly about creating real value for the general public, that is, creating products (or services, or donations, or business processes) that benefit people?)

"As hedging strategies go, this remains far from sure to work."
The Financial Times suggests looking past the immediate controversy and into the future, with an article by Gillian Tett entitled, "Can today's philanthropy fend off future bank-bashing?" The article asks, "What exactly was going through the brain of Lloyd Blankfein, head of Goldman Sachs, this week when the bank announced a $500m initiative to help small American businesses?" Tett argues that, while making "an effort to quell the current bank-bashing" might be part of the company's reasoning, "Goldman, is (in)famous for trying to be ahead of the curve. And the really interesting political economy issue that haunts finance now, is not the attacks that Goldman (and other banks) have suffered in 2009 - but the question of what could await them in 2010, 2011, 2012 or beyond." The article suggests that, if the economic situation gets worse instead of better, we could see far greater public outrage. In this context, "Can Goldman's $500m programme protect the bank against that political risk? On paper, the target of its largesse certainly looks politically savvy: small business funding is a huge political headache in the US right now, due to its link with unemployment." However, Tett goes on to say, "...the grim fact remains that $500m is still just 3 per cent of the bank's bonus pool - and even a non-banker can see that is a small sum. As hedging strategies go, this remains far from sure to work."

"Goldman's wholesale focus…does not suit retail diplomacy."
A second Financial Times article, while focusing on the various problems threatening Goldman's reputation (its "most precious asset"), raises a very interesting question about its philanthropic efforts: "One difficulty is that Goldman's wholesale focus means little business contact with an angry public – it does not suit retail diplomacy. Even well-designed charitable initiatives, then, risk being misinterpreted." The article doesn't elaborate much on this idea, so I'm not completely sure where the authors are going with it, but I think this is a really interesting comment. It's true that the vast majority of people don't really know what Goldman Sachs does, not in the way that we know what, say, Wal-Mart, or Disney, or Bank of America do. (This relates to the advice in the NYTimes article referenced above, "Wall Street's Spin Game".) We interact with the latter companies' products and services every day, but hardly any of us interact with Goldman. As such, is it possible for the general public to have a relationship with the company, and is such a relationship critical to our ability to trust them? This is important because, as I discussed in my last post about Goldman Sachs, while CSR initiatives may build trust, they need to be built on a baseline of pre-existing trust, or people might not trust the activities or might see them as disingenuous. So, what does this mean for business-to-business companies? Are there other ways they can create that baseline of trust, or, as this FT article suggests, are they simply not suited for "retail diplomacy"?

I'm interested in looking at other instances in which a corporate philanthropy commitment has been met at least in part with negative feedback - I think isolating what doesn't work would help us to better understand what does. If you know of any good examples, I'd really appreciate hearing them.


Thanks!

Goldman’s $500 Million Controversy

Goldman just made a big charitable commitment - and stirred up quite a bit of controversy. Did the company design or execute the program poorly? Are its critics being unreasonable? In this post, I examine the program and some of the reactions to it, consider what could be going wrong, and summarize the analysis of several experts in a recent discussion of the issue in the New York Times. What's your take?

Last week, I wrote about the Goldman Sachs Foundation and the company's employee giving activities. In that post, I postulated that the company was using philanthropy in part to mitigate widespread discomfort (too weak a word?) with its large employee bonuses. I also complained about comments like the following statement from a 2007 New York Times article about one of the firms' giving vehicles: "Cynics who have watched the wealth creation at Goldman might think that the program is little more than a public relations effort to mask the gigantic bonuses it is expected to pay out starting in early December…" Instead, I argued, "I don't think that's cynical at all, though, nor do I think it takes anything away from the firms' - or its partners' - philanthropy. If the company is recognizing a risk, and utilizing philanthropy as one of the tools it uses to minimize that risk, that's good strategic corporate philanthropy."

Based on general reactions to one news story this week, though, it looks like a lot of people disagree with me! This week, Goldman announced a $500 million commitment to a new "10,000 Small Businesses" program. According to an article that appeared on the New York Times website on November 17, the company will "provide $200 million to pay for small-business owners to get business and management education at local community colleges and other places," offer $300 million of grants and small loans to small businesses, and also provide mentoring (by employee volunteers) and networking opportunities to these same small-small business owners. Yesterday, an article in the Wall Street Journal gave slightly more detail, stating that $250 million of the total would be distributed as loans, with an equal quantity in grants. Warren Buffet and Michael Porter (HBS professor, major contributor to the field of strategy, founder of a nonprofit that fosters entrepreneurship and economic development in inner cities) are among the effort's advisers. The company's own discussion of the initiative is here.

 Theoretically, this program makes a lot of sense as a strategic philanthropy effort. Currently, one of Goldman's major problems is that, as the New York Times put it, "it has become a punching bag for an industry that is seen by many to have benefited unfairly from billions in taxpayer dollars." People are angry that the government bailed out the financial sector, and now Goldman's employees, according to the same article, has earmarked $16.7 billion "so far" this year for employee pay. Meanwhile, unemployment remains high and the general public hasn't seen the end of this recession.

As a result, it makes sense that Goldman is investing in an effort that, if successful, is presumably designed to stimulate economic growth, from the bottom up. It is investing in small businesses, providing two resources that it has in abundance - cash and employee talent - to a population that could utilize those two resources to grow, creating social benefit. There is a direct connection between the problem Goldman faces (anger over its unequal share of the wealth) and the solution it is offering (creating a program to generate more wealth for the people who currently have a smaller piece of the pie), and it is utilizing resources that it has unique access to in order to provide that solution.

Simple, right? Um, apparently not, if the 97 comments (as of the time of this post) reacting to the Wall Street Journal article are any indication. While Goldman certainly has its defenders among WSJ commenters, responses like these were common (the commenter's name follows the quote):

• "The 500 million would be pro rata 2.5% of their annual bonus this year, which is cheap buy-out for the public opinions…" (JAMES DREITO)
• "The amazing part is these Goldman "masters of the universe" think we are all that stupid that we will fall for this not so subtle act of contrition...it sure must be nice to own both political parties and get away with anything and everything." (John McIlvenna)
• "Goldman's actions are sickening. After STEALING tens of billions of dollars from the US taxpayer, Goldman is now insulting America with this cheap trick. Goldman Sachs must be destroyed before it destroys the US." (Peter Marlow)
• "What a crock. A despicable move by Goldman to appease the masses. My bet is less than 10% of the "500 million" is ever distributed. Certainly less than $50 miliion (SIC) will ever be actually given away. Who are these creeps kidding? Endless pox on them." (Michael Smith)
• "Wow, how generous of the crooks who helped create a financial meltdown, then took $64 Billion in tax payer money to make themselves whole only to pay the people who caused this billions in bonuses. It now makes sense that they should get some good Public Relations from our money and ....another tax break for handing out charity to us poor folk west of the Hudson." (TOM OKEEFE)
• "Blood money." (Dirk Dreux)

So what did Goldman do wrong? I can think of a few possible issues (but I feel like these ideas could use some sharpening or refinement, and I'd love your thoughts on how to do so):

• Corporate philanthropy, and CSR more broadly, can definitely help mitigate reputational and other types of risk, but it doesn't cause other acts that people judge negatively to go away. In fact, if the CSR activity seems hypocritical, people tend to react really negatively. Is that what's going on here? The fact that many commenters (and journalists) brought up a recent quote by the Goldman CEO, where he claimed that the firm is "doing God's work", suggests that this is a factor.
• CSR can certainly promote trust, but maybe companies need a baseline of trust that is built through their general business activities. Otherwise, you get reactions like the ones revealed in some of the comments quoted above, with people questioning whether the company can be trusted to carry out the program as promised.
• While I still believe that PR (and other business) benefits are a legitimate motivation for CSR, really good business benefits most often (though not always) come from a program's outputs and results, not just the inputs. That is, Goldman is likely to get real credit if and when it can show that it's donation has promoted economic growth. A good illustration of this viewpoint comes when the New York Times article quotes Andrew Stern, president of the Service Employees International Union, regarding his thoughts on the Goldman commitment: "It's a down payment, a step forward and hopefully a precursor of a different discussion — in the long run, how do we build an economy where everyone can share in the success?" he said. "But if this is an isolated public relations activity, it's insufficient."
• Or maybe I'm just in the minority, and the majority of people believe that corporate philanthropy should not benefit the business, and the companies should carry out philanthropic activities because "it's the right thing to do".

Today, the New York Times, in its Room for Debate section, tried to hash out some of these questions. It asked, "Does the firm have an obligation to make philanthropic efforts, given that it benefited from the federal support? How can the most be made of this opportunity? Should Goldman be committing more than $500 million, based on its bottom line?" It pulled together a great panel to weigh in on the matter, including:

• Matthew Bishop and Michael Green, "Philanthrocapitalism"
• Robert Johnson, economist
• Nicole Gelinas, Manhattan Institute
• Nomi Prins, senior fellow, Demos
• Peter Firestein, author
• Charles Best, DonorsChoose.org

Bishop and Green reacted similarly to Andrew Stern. They argue, "If this announcement is the first of many acknowledgments by the leading lights of the finance world that the winners in our economic system have a responsibility to ensure that the benefits are spread throughout society, then Goldman C.E.O. Lloyd Blankfein's recent claim that the firm is "doing God's work" may not be so ridiculous."

Johnson focuses not on the donation, but on what he sees as the structural problems that made it possible: "...Goldman Sachs would not have that $500 million of spiritual bounty to distribute if it weren't for the U.S. taxpayers. Charitable giving is nice, but we can't take our eye off the ball when it comes to the need to repair our structure of government and address the undue influence of Goldman Sachs and the other powerful financial sector firms." In other words, in his view, the philanthropic program does not address the root problem.

Gelinas is concerned that Goldman's efforts will be too successful as a PR initiative, particularly among politicians. She argues, "That is, Goldman makes tons of money thanks to an implicit taxpayer "too-big-to-fail" subsidy, and it will give a little bit of that money back in ways that please important political constituencies like the National Federation of Independent Business on the right and the National Urban League on the left, each of which will help the firm with its small-business undertaking. Because it sweetens too-big-to-fail politically, the charitable initiative is bad for the economy and society."

Along somewhat similar lines, Prins suggests that the target audience for this initiative - not in terms of beneficiaries, but in terms of whom Goldman is looking to influence - is not in fact the general public, but the government: "Mr. Blankfein missed the opportunity to be genuinely concerned about the little people about a year and a bailout ago. So he's sacrificing a $500 million pawn and by doing so, he may placate the government — a more necessary a task to him than being universally loved."

Firestein's argument draws on two of the theories I laid out above, including both the idea that the public will reject perceived hypocrisy and that a baseline of trust is required before companies can use social engagement to augment that attribute. He says, "It's a lot of money (to anyone but Goldman) but it does nothing to convey a change in the bank's attitude toward the society around it." Furthermore, he argues, "That Goldman has allowed its reputation to sink so low as to make half a billion seem like a token causes damage far beyond the bank itself. It may undermine public sentiment toward truly needed financial entities for a long time to come."

Finally, Best shares his ideas for how Goldman could improve the execution of this project. He also shares his own experience as the recipient of Goldman funding: "I know from personal experience what Goldman Sachs funding can do for a small enterprise." In this way, though not explicitly, he draws on the idea that results are important, holding up Goldman's success in helping him as evidence that perhaps they can do this well, too.

What do you think? Are Goldman's critics being unreasonable? Is the company's corporate philanthropy strategy a poor solution for the problem the company is trying to address, or has it done a poor job executing this strategy? Do motives matter, and if not, where does hypocrisy come in? Or does this situation reveal that there are simply limits to the strategic benefits of corporate philanthropy?

CSR and Social Media

In the past month or so, it seems that conversations about the relationship between CSR and social media are everywhere. This obviously isn't a new topic, but it seems to have hit a new level of prominence. Here are some of the exciting articles and studies that have come out on this topic recently:

3BL Media CEO Greg Schneider explores the role of social media in CSR in a piece entitled "The 'Real -Time' of Social Media". He argues that companies must figure out how "...To communicate effectively in ways that a growing, "green-focused" audience, consisting of varied demographics, is responsive to and can trust." Social media tools, he advises, amount to "...new and different ways to reach an audience no longer receptive to traditional methods such as press releases." Furthermore, "...successful organizations have begun to realize that the value of delivering their messages, consistently in all different media formats, engages a passionate audience." I was particularly interested in his argument that companies should deliver their message "where they're (the consumers are) already spending Web time… Forget about the destination Web site. Game over."
 
Cross Border's IR Magazine reports on a study by Lundquist, a "strategic communication consultancy, specialising in online corporate communications". According to IR Magazine, the study "finds that while disclosure of information is usually of a high standard in CSR reporting, communication and interactivity are lacking". The article goes on to say, "The most damning result of this one-way system is that 'companies are publishing a lot of good news and avoiding the hard (sometimes uncomfortable) facts that stakeholders need if they are to judge how well a company is performing in non-financial matters,' states the report." The is particularly problematic because, "As the report points out, the internet has brought about higher expectations for corporate response." The IR Magazine article is here, while the Lundquist report is here. Jo Confino of the Guardian reacted to the study here.

In CSRWire, Bill Baue of Sea Change Media wrote an article entitled, "Corporate Social Responsibility + Social Media = Power of Transformation". He is working with Marcy Murningham and Bob Massie on a research project for the Harvard Kennedy School's Corporate Social Responsibility Initiative, about Web 2.0 and corporate accountability. In the post, he talks about his experiences at several recent conferences and the connection between those events and the theme of CSR and Web 2.0. I was particularly intrigued by the following statement: "The week's takeaways: web 2.0 holds great promise to transform the way companies engage with stakeholders, but we are still way early in the innovation curve on using web 2.0 to advance corporate sustainability and accountability!" It sounds as though he's distinguishing between the use of social media as a tool to talk about CSR and the use of social media to actually advance one's CSR activities - I think that's an important distinction, and it's one that can be easy to forget about.

In Mashable, one of my favorite sources of news on social media, Melissa Jun Rowley wrote an article entitled, "Why Social Media Is Vital to Corporate Social Responsibility". So many good quotes!

• "The result of things like the current economic climate and recognition of global climate change, society is starting to push past awareness and into action." (Reminds me of the move fromWeb 1.0 to 2.0)
• "…The standard for CSR is being redefined and is evolving as a driver of innovation."
• "There was a time when companies issued press releases, and operated under the impression that they controlled the message of their brand. Those days are gone. Today, the brand image is linked to the thoughts and conversations of a company's consumers. Therefore, businesses must get to know their constituents."
• "Absolute transparency, no holds barred, is key."
• "When consumers are treated as citizens, they can do everything from helping a company amplify its voice, to voting on the style of a new product, to improving a service."

Cone has released the results of its 2009 Consumer New Media Study. You can download the findings here. Among the intriguing conclusions:

• "Almost 80 percent (78%) of new media users interact with companies or brands via new media sites and tools, an increase of 32 percent from 2008 (59%)." (What an opportunity this is for companies to build meaningful relationships with their consumers!)
• Of course, this new opportunity comes with increased responsibility: "New media users overwhelmingly believe companies or brands should not only have a presence in new media (95%) but also interact with their consumers (89%)." (This is consistent with Lundquist's conclusion that people expect increased responsiveness from companies in this internet age.)
• "Forty-four percent of American new media users are searching for, sharing or discussing information about corporate responsibility (CR) efforts and programs..."
• "Sixty-two percent of users polled believe they can influence business decisions by voicing opinions via new media channels. " (I love this stat!! I think this connects back to Melissa Jun Rowley's statements about treating consumers as citizens, quoted just above - is there something big here?) 

Of course, if you're interested in this topic, you're probably already familiar with Justmeans, which, among other things, helps companies "Syndicate (their) good work to multiple social networks with Justmeans" in order to "Attract and ignite advocates for better business". Justmeans recently put on the Social Media for Sustainability conference. Bill Baue talks about the event in the CSRWire article discussed previously in this post. If anyone else attended and can share some of the highlights, or knows where presentations or videos might be posted, please share!

I'm very curious to see where this is going. If you see great examples of how companies are using social media as part of their CSR efforts, or if you have thoughts on the key themes that run through these activities, I'd love to hear more.

The New York Times on the Goldman Sachs Foundation, or WHY Can't We Acknowledge that CSR is Good for a Company??

The New York Times just posted to its website an article about the Goldman Sachs Foundation's most recent tax filing. The Goldman Sachs Foundation is interesting because it holds significant assets, like a private foundation. My understanding (I don't have the statistics to back this up, anyone know for sure?) is that many/most company foundations are pass-through entities ,with the company donating the next year's budget at the beginning of that year. As a result, as the Foundation's tax filing contains information about how its assets were managed, the article reports that it "...provides a glimpse of the legendary trading that has helped put the firm on track for its best year ever."

The article goes on to discuss what the reporter seems to see as Goldman's use of corporate philanthropy as a reputation management tool: "Given the firm’s anticipated profits and supersize bonuses, which have touched off public furor, it is no surprise that Goldman said recently it would increase its charitable giving. It has set aside $200 million to nearly double the size of its main foundation."

Interestingly, this article about the company's foundation also discusses giving by its executives. "After Mr. Whitehead (that's former co-chairman John C. Whitehead) challenged the firm to do more, it created a donor-advised fund that it hoped would reach $1 billion over a few years. The fund allows the firm’s 400 partners to put aside money for the charities of their choice." I know that companies often report on employee giving as part of their overall philanthropic efforts, but this isn't your typical employee giving campaign. While the company did make its own donation to the Goldman Sachs Charitable Gift Fund, it (like any donor-advised fund) primarily facilitates giving by the donors (to "the charities of their choice").

At first glance, this is a bit random - what interest does Goldman have in its partners' personal philanthropy? However, one of the big strategic issues that Goldman seems to be facing these days is managing its reputation in the face of that "public furor" over "supersize bonuses". As such, it makes a lot of sense that the firm would want to encourage and promote charitable giving funded by those bonuses. Actually, it's even more interesting given that the Fund predates the crises, or at least the worst of it, which suggests this is a relatively long-term concern for Goldman Sachs.

Here's an article about the creation of the Fund - though the article calls it by a different name, GS Gives - from November 2007. One interesting line from that article, in light of my above analysis: "Cynics who have watched the wealth creation at Goldman might think that the program is little more than a public relations effort to mask the gigantic bonuses it is expected to pay out starting in early December (to be paid next year). But few want to discourage charitable efforts. " I don't think that's cynical at all, though, nor do I think it takes anything away from the firms' - or its partners' - philanthropy. If the company is recognizing a risk, and utilizing philanthropy as one of the tools it uses to minimize that risk, that's good strategic corporate philanthropy.

It doesn't surprise me that some would see such activity (if that's even Goldman's intent, I could be assigning them motives that aren't there) as self-serving. However, I believe that it's only when we maximize the positive impact that CSR (including corporate philanthropy) can have on companies will we be able to maximize the resources that companies invest in CSR. As such, I WANT to see companies connecting their CSR efforts to public relations or any of the many other business needs that CSR can help serve. However, I often see comments like the one in the 2007 article, suggesting that there is something wrong with a company that seeks to use CSR as a tool to meet its business goals. Similarly (and probably because of those comments), I SO OFTEN hear CSR executives lay out some great, strategic ways in which their CSR activities fit into the larger business, but then say that the company really only gets involved in CSR because it's "the right thing to do". It may or may not be the right thing to do - I'd just as soon avoid Milton Friedman this late at night - but we WILL NOT achieve CSR's full potential if that's the best reason we can give for engaging in corporate social responsibility.

But how in the world do we get past this issue?? Please, if you have any thoughts or ideas on this, share them in the comment section below.

News Update: Environment

A couple of articles on CSR have caught my eye recently:

• "Everybody in the Pool of Green Innovation" - Over the weekend, the New York Times published an article looking at communication and collaboration among companies seeking to improve their environmental performance. In particular, the article talks about companies that donate patents for environmentally-responsible products, processes, etc. to the public commons.
  

• "With New Care Tags, Levi Strauss Aims to Reduce Its Footprint" - Interesting way to manage product lifecycle concerns - according to the New York Times, "The company will soon sew revamped tags into all of its clothing that instruct people to donate items when they are no longer needed." The tags will also recommend washing practices (cold wash, line dry) that conserve energy .
  
  

It's interesting that, in both cases, the CSR activities don't necessarily require a major investment by the company. The donated patents, for instance, are primarily patents that aren't especially strategic to the donor companies, so the donors don't get much value out of holding them close. By donating the patents to the public commons, the donor companies enable a range of other players to be more sustainable. Similarly, I don't think Levi Strauss is incurring any extra cost (beyond redesigning its labels, I suppose) by asking consumers to be more thoughtful about the environmental impact of their jeans - instead, as in the green innovation article, the company in question is making it more likely that an external party behave more responsibly. (Of course, these low-cost activities may be packaged with higher cost activities, like grants that seek to leverage their impact.)

These are great examples of companies indentifying CSR activities that are relatively cheap for them to carry out, but relatively high value for the community at large.

BSR Conference - Session Summaries Available

Business for Social Responsibility held its conference in San Francisco last week. Titled "Reset Economy. Reset World.", the conference implored attendees to "Deliver Business Value by Thinking Big and Embracing Long-Term Sustainability Trends".

My favorite new trend in conferences is that everyone is tweeting, blogging, and streaming their sessions, so those who can't attend in person can still participate. BSR is a great example of this, having put Session Summaries (featuring an overview of the conversation, including "memorable quotes") up on this website, along with video clips of key speeches. I highly recommend checking out the summaries and videos - I'm particularly excited to learn more about sessions like "The Changing Function of the CSR Team in a Reset World", "Sustainable Consumption", and "A Conversation with Pamela Passman". (Regarding the latter, I'm intrigued by Microsoft's CSR efforts and especially by Passman's comments in the summary about collaborating with competitors on sustainability.)

You can also find a few blog posts about the conference on BSR's blog, The Business of a Better World, as well as fairly extensive coverage by GreenBiz.com, at this website.

If anyone else attended the conference and wants to share thoughts and impressions in a guest post, I'd love to hear from you! You can email me at reimaginingcsr (at) gmail (dot) com. Of course, also feel free to leave your ideas in a comment.

Thanks!

Welcome Back to Reimagining CSR!

Welcome back to Reimagining CSR! I originally started this blog as part of a project for my MBA, and I stopped blogging when I graduated. Now, though, it's undeniably fall in Boston, and while I've been back in the world of full-time work for a couple of months now, the back-to-school feeling in the air is inspiring me to start writing again.

Last spring, we talked a lot about the impact of the recession on CSR. We looked at news and research on the topic, and we listened to chatter among practitioners. We considered reasons that the recession could increase socially responsible activities among companies (here and here), considered possible negative ramifications of some of these activities, and sometimes wondered why we didn’t see still more companies engaging in win-win activities. I know this is a topic that remains of interest to many of you. Even now, searches like "recession CSR" continue to bring new readers to this blog.

Because of that shared interest, I'm excited to draw your attention to the Boston College Center on Corporate Citizenship's recently released report, "State of Corporate Citizenship 2009: Weathering the storm". This document is the fourth installment in the Center's biennial series. Each report is based on a "survey of the attitudes and actions of senior executives in small, medium and large businesses regarding corporate citizenship."

Some particularly exciting findings, as summarized in the report by Barbara Dyer, President and CEO of The Hitachi Foundation:

• "...over half of these business leaders believe that corporate citizenship is even more important in a recession."
• "Increasingly, companies are aiming to integrate corporate citizenship with their business strategy." (This is something that we discussed in our conversations last spring, and it's also consistent with early research from the Conference Board.)
• "More businesses’ leaders recognize that being a good corporate citizen adds real value to their firm. Particularly when times are desperate, attention is focused like a laser on those matters that contribute value to their bottom line. Most businesses maintained and some others expanded their attention to, and budget for, corporate citizenship. These actions are the strongest evidence that corporate citizenship has met the value-added test for a large and growing segment of U.S. businesses."
  
  

Reports like this one make me hopeful. They make me consider that, in the long run, this recession might be a good thing for the field of CSR. I hope that, as companies are faced with both increased social needs and decreased resources available, they will learn to build programs that are truly win-win. These programs will go beyond just looking good in a press release, to be truly embedded in the companies' business strategies. As I've said before, I think that only when companies see CSR as a critical component of achieving their larger business goals will they invest in CSR not as a nice-to-have, but rather at the levels required to enable CSR to fulfill its potential.

Profile - McKesson and Comparative Advantage

On Monday, I wrote about corporate philanthropy and comparative advantage. I argued that companies should focus their corporate philanthropy programs on contributing resources to which they uniquely have access, resources that they can provide at a cost that is lower than the beneficiary would pay on the open market. As such, I argued that most companies should donate primarily expertise and perhaps products, giving cash only to leverage such donations. Today, I want to illustrate that theory.

Last week, I had the chance to speak with Carrie Varoquiers, President of the McKesson Foundation and Vice President of Corporate Citizenship at the McKesson Corporation. Back in February, I wrote a post on the impact of the recession on CSR. Carrie commented on that post, saying, in part:

“I have also noticed a dearth of corporate operating foundations, which is actually quite surprising. Most corporations have institutional knowledge and in-house resources to create and manage social benefit programs, especially if their Foundation’s mission is well aligned with their business. It’s very curious. Perhaps we will see more of this model moving forward.

I’m not saying traditional grantmaking corporate foundations shouldn’t exist, I am simply saying that it’s not the only option for creating meaningful social change.”

This way of thinking is very much in line with how I think about corporate philanthropy and comparative advantage, so as I was writing Monday’s post, I reached out to Carrie to hear more about how she approaches this issue.

First, a bit of background: San Francisco-based McKesson describes itself as “a health care services company dedicated to helping its customers deliver high-quality health care by reducing costs, streamlining processes, and improving the quality of care and patient safety.” According to its profile on Hoovers.com, the company is a pharmaceuticals distributor (the biggest in North America) and a medical supplies wholesaler; it also provides software and technical services to insurers and health care providers. The publicly-traded company’s 32,000 employees generated 2008 sales of $101.7 billion.

Carrie joined the McKesson Foundation in 2003 and took on her current role last year. She told me that, historically, the company practiced more “traditional philanthropy”, giving small grants to a wide variety of nonprofits because it was the right thing to do. Recently, though, McKesson engaged in a strategic planning process for its community engagement function. As a result, it’s decided to focus its efforts on chronic disease management, beginning with diabetes.

McKesson’s approach to this issue goes beyond aligning the company’s cause with its business goals, which has been the extent of strategic philanthropy for most companies. McKesson is also aligning the types of resources it donates with its own comparative advantage. As Carrie points out, the company could have chosen simply to make a grant to a nonprofit that works on diabetes management. Indeed, cash is a resource of which McKesson has plenty – as of December 31, 2008, its financial statements indicated that it was carrying nearly $1.2 billion of cash and cash equivalents on its balance sheet and stockholders’ equity was close to $6.2 billion. However, as I discussed yesterday, McKesson does not have unique access to cash. Instead, it has unique access to its professional expertise – and Carrie told me that the company has professional experience in chronic disease management.

According to McKesson’s new strategy, while grantmaking will continue to be a component of its philanthropic strategy, the company will also operate its own social engagement programs – something along the lines of the corporate operating foundation Carrie mentioned in her comment. The company will be contributing its expertise in chronic disease management, which I believe will enable it to contribute resources of greater value than the cash it could contribute for the same cost to the company. Currently, the Foundation is investigating the feasibility of a diabetes cell phone project, whereby automated calls are made to diabetes patients, who respond with information about their blood sugar levels; the technology flags patients that require follow-up. The technology, which Carrie described as inexpensive, has demonstrated decreased ER visits in pilot programs.

I’m especially interested in the fact that the company is experimenting with an earned-income strategy for its foundation. The McKesson Foundation hopes that, by selling the program to insurance companies based on the expected cost savings, it will be able to subsidize the cost of providing it free to uninsured patients in community clinics. Through this earned-income approach, Carrie hopes not to get more money into the Foundation’s endowment, but instead to be able to expand this healthcare quality improvement to more patients.

I asked Carrie why, given the apparent market opportunity, McKesson is researching this project through the Foundation, instead of a business unit. She told me that, in such a large, geographically dispersed company that provides so many services, “This project is in its infancy, so little data is available to prove the viability of this disease management strategy yet”. She described the company as mission-driven - "everything that we're doing is improving patients’ lives" – so the business unit presidents see all of their possible business opportunities as beneficial to society and, within that, look for the largest profit margins and the largest markets. While the project has not yet met the investment criteria for McKesson’s business units, the corporate social engagement function has the flexibility to take it on if the feasibility study proves successful.

I also asked Carrie about some of the challenges she’s facing as she takes this relatively unorthodox approach to corporate philanthropy. She talked a lot about innovation, and the lack thereof in the very traditional field of philanthropy at Fortune 500 companies. She told me that change will have to be driven by the leadership of these companies, or by the analysts who evaluate their activities. She also acknowledges that this approach to social engagement is much easier for her to implement, given the industry in which McKesson operates – “I don't know how that would work if you were looking at a company like Gucci”. I was particularly intrigued by a comment she made earlier in our conversation, about the need to take care in carving out a philanthropic focus area when a company decides to donate the resources it uses to make money – she told me that, when the McKesson Foundation attempted a similar social engagement approach a few years ago, the project ended up in direct competition with one of McKesson’s business offerings. As such, it was important that she identify an area that the company is not in and doesn’t plan to expand into, at least in the near future.

I’m really excited by McKesson’s approach. As I said on Monday, I think companies can dramatically increase the impact of their community involvement, without changing its cost to the company in question, by leveraging the very resources that make them successful in business. McKesson has a comparative advantage in providing expertise about chronic disease management, and that’s relatively more valuable that its cash contributions. I look forward to following this story to see how it works out and what we can all learn from McKesson’s approach.

Comparative Advantage and Corporate Philanthropy

What's the most valuable thing Coca-Cola has to offer? Its brand, certainly, helps it outsell its competitors. I'm sure the company also places great value on its top-secret formula. I'm particularly impressed with the company's distribution network - my friend once saw a Coca-Cola billboard in a rural, rural part of East Africa, hours from the nearest city, and it certainly seems that you can buy a Coke anywhere in the world.

Other successful companies have their own unique, highly-valued assets. GE is famous for its leadership development expertise, and McDonald’s has real estate portfolio with an incredible footprint. Microsoft has an enviable amount of cash sitting on its balance sheet, but I'm sure the company is more concerned with hanging on to its talented developers, who create solutions to problems that stand in the way productivity.

When Google.org announced its reorganization last month, the company also stated, "…our greatest impact has come when we've attacked problems in ways that make the most of Google's strengths in technology and information". That is, Google.org feels it's had the biggest impact on the social problems it cares about when it has utilized its own most valuable asset - in my interpretation, that includes Google's employees and their unique expertise in using technology to solve problems that stem from a lack of organized, accessible information.

This makes a lot of sense to me. When companies put their unique assets to work on social problems, they offer a resource that almost no one else can offer. Furthermore, they can typically make an impact utilizing their existing skills and processes more cost-effectively than a nonprofit partner could buy those services on the open market. One very clear impact of that is in the pharmaceutical sector. Thanks to the economics of the pharmaceutical industry, while fixed costs are very high (drug discovery is ridiculously expensive, and I imagine that setting up manufacturing isn't cheap), marginal costs - the cost of making one extra dose - are fairly low. As such, a pharmaceutical company will have a much greater impact if it donates drugs that cost it a million dollars to make, rather than contributing a million dollars cash, as the recipient of the cash donation would be able to buy a far smaller quantity of drugs than the quantity the company can make for the same cost to the business.

Basically, I think it all comes down to comparative advantage. Companies might have a lot of cash - maybe even more cash than a lot of the other players in a community. They don't have UNIQUE access to cash, though, and cash isn't the most valuable thing they can offer. So if you have a foundation that could offer a $100,000 grant, and a company that could offer a $100,000 grant OR a service (that the grantee needs) that would cost the company $100,000 to offer but would cost the grantee $200,000 to purchase, wouldn't you want the company to specialize its philanthropy in donating that services? Of course, nonprofits have a need for cash as well, but better for the foundation to specialize in that offering, while the company specializes in something that no other donor can offer as cost effectively.

Of course, sometimes a company needs to donate some cash to unlock the value of the donated product or expertise. I recently read a case about Merck's corporate social engagement activities (Rangan, V. Kasturi, and Katharine Lee. "Merck: Global Health and Access to Medicines." Harvard Business School Case 509-048), for a class I'm taking called Business at the Base of the Pyramid. One part of the case described the company's philanthropic activities in Botswana around 2000, where Merck donated both cash ($56.5 million) and antiretroviral drugs. According to Raymond V. Gilmartin, then Merck's CEO (and now a professor at HBS):

"It was very clear to many of us that just giving free drugs would not do it. We needed to engineer an entire supply chain, train health professionals, build infrastructure for testing and treatment. All this and more would be crucial to the success of the program."

If Merck had just donated drugs - the resource in which it had a comparative advantage, relative to the other players in the public health space - the drugs might not have ultimately been deployed effectively. However, note that, in this particular initiative, Merck partnered with the Gates Foundation, which also put in $56.5 million in cash - this allowed Merck to redirect its significant but ultimately limited corporate resources to that which it uniquely could offer. Overall, according to the same case, in 2007, Merck donated $828 million, including $62 million in cash (7% of total giving), $161 million through the U.S. Patient Assistance Program (19%), and $605 million via the Merck Medical Outreach Program (73%); the latter two programs, accounting for nearly 93% of total giving, are both product donation programs.

Overall, corporate giving in the US, when broken down by cash and non-cash giving, doesn't look like Merck's program. In its "The 2008 Corporate Contributions Report", The Conference Board surveyed 197 "major" companies regarding their 2007 giving. The survey found that, among the U.S. respondents, 45.77% of giving was cash, while 54.23% was non-cash; interestingly, among non-U.S. companies, 66.20% was non-cash. The Committee Encouraging Corporate Philanthropy (CECP), in its 2008 "Giving in Numbers" report, had somewhat different findings - it surveyed 155 companies, including 69 of the largest 100 public companies in the U.S., and found that 20% of total giving was non-cash. (I'm not sure why this discrepancy exists - my best guess is that the Conference Board survey happened to include a few more of the big pharma companies, which tend both to give more and to give a higher percentage of contributions in the form of non-cash giving - for instance, in the CECP report, which categorized the respondents into eight industries, "health care" was the only one that gave more than half of its contributions in this form.)

Either way, though, it's clear that most companies are not focusing primarily on contributing their core competencies, and cash is used as more than a way to leverage non-cash contributions. Based on the logic I've laid out thus far, I don't think that's a good thing. I think it's inefficient for companies to give so much cash when they have more valuable resources available, that the total value of corporate contributions would go up if companies were to focus more on contributing the non-cash resources that make them successful in their core businesses.

That said, I have to admit that I'm a bit uncomfortable with the logical conclusion of my argument, that cash contributions by companies would fall significantly. Cash, after all, is much easier to use, and it's much more flexible - it can be deployed to address any number of needs. Companies play an important role in funding the small nonprofits that make up the fabric of a community. Those relatively small grants might not play a big role in the companies' philanthropic strategies, but they might be awfully important to the recipients. As companies become more and more strategic in their community involvement - and I think this is a very, very good thing - what happens to these small organizations, which have for so long received grants just for being local? Big organizations may have well-developed systems for receiving and utilizing product donations; they may have entire departments that can coordinate the use of highly-skilled volunteers, but can your local homeless shelter extract value from a non-cash gift as effectively as it can spend the cash?

I think small nonprofits can indeed utilize these resources, but it will take a constellation of intermediary organizations to make this happen. The United Way and community foundations have, for generations, created economies of scale for their local nonprofits by raising money, pooling it, and distributing it in relatively small quantities, to organizations that, individually, might not have been able to afford to build extensive fundraising departments. Today, Taproot Foundation is playing a similar role with skills-based volunteerism. By coordinating teams for professionals in areas like marketing and strategy management and "granting" the teams to nonprofits that might not be able to solicit and manage such pro bono services on their own, Taproot helps bridge the divide described above. Similarly, Gifts In Kind International was able to accept $750 million in product donations last year, from thousands of companies, and distribute them to 150,000 organizations.

I also think it's critical to recognize a key area in which most companies do NOT have a core competency - identifying social problems and figuring out how to address them. There are exceptions to this rule - health care companies, for instance, probably have quite a bit of relevant knowledge in-house. In most cases, though, it's important for the corporate partner to acknowledge that it doesn't have a comparative advantage in this piece of the puzzle, while its prospective nonprofit partners do. I think that building strong, thoughtful partnerships is an important way to ensure that each player can individually contribute its own comparative advantage, and that together, the suite of offerings meets the social needs in question.

So could Coca-Cola use its amazing distribution expertise to help development organizations solve the "last mile" problem in international development? Could GE invite nonprofit leaders to its leadership courses at Crotonville? Could Microsoft put its developers to work solving the computing needs of the worlds' poor? Could McDonald's engage in a social marketing campaign with incredible reach, given the fact that, every day, millions of people all over the world spend several minutes within an environment that the company controls?

Certainly, these companies, and many others, are creating innovative solutions utilizing their comparative advantages - Coca-Cola, for instance, donates its distribution expertise and capacity for the purpose of disaster relief, while Microsoft, through its Unlimited Potential program, uses the company's skills and knowledge to create technology products that foster economic and social development at the middle and base of the economic pyramid. If you have other examples, PLEASE post them in the comments section.

I think there's a lot of potential for companies to increase their impact without increasing the cost to the company of community involvement. This makes me really optimistic about the future of such social engagement, despite the tough economy. While companies seem to be taking corporate citizenship seriously, I think that we have yet to hit the inflection point, in terms of the impact they can have on the community. I think that focusing on comparative advantage - and recognizing that, in many cases, this means shifting from donating cash to donating expertise or products - will be a major factor in getting there.

News Update

Lots of interesting news in CSRWire recently! A few of the stories in Wednesday's Weekly Alert that I found intriguing:

The Company You Keep: IBM Sustainable Procurement Consulting Service Helps Clients Reduce Costs, Ensure Suppliers Are "Green," Ethical, Safe - IBM has developed a consulting offering through which it will help its clients "establish sustainability standards… throughout their global supplier networks".

UN Global Compact Annual Review Highlights Progress Made, Identifies Gaps in Corporate Responsibility Practice - Covers results from the "United Nations’ largest-ever corporate responsibility survey" . The short story: "...corporations around the world are making progress in adopting responsible business practices. Yet, serious implementation gaps remain, particularly in supply chain management and subsidiary engagement." (Looks like supply chains are a theme!)

Despite Economic Pressures, Majority of Companies Plan to Increase Emphasis on Sustainability - Reports the findings of a survey by of corporate communications professionals. Favorite quote: "'At a time when the economy requires everyone to stay focused on the essentials, it's noteworthy that businesses are putting sustainability programs into that must-do column,' said Nancy Costopulos, chief marketing officer of the American Marketing Association."

Then, from the New York Times:

Getaways That Are ‘Guilt Free’ - The story is about vacations that won't make you feel guilty about spending a lot of money on a luxury during a recession. It talks fairly extensively about programs that incorporate philanthropy and service into the trip. Will this be a long-term trend in the travel industry? Is it moving beyond the tour operators covered in this story to incorporate hotels and other players in this industry?

Have you seen any interesting news lately? Please post a link!

Cause Marketing Motivations

Why do people buy products that are part of cause marketing campaigns? I've always assumed the obvious, that it was mostly because they care about the cause being promoted. Or maybe they don't care about the specific cause, but they feel good about doing something that makes the world a little better, irrespective of how it does so. I also suspect that sometimes, it's just because the cause promotion helps the product break through the clutter - when you're looking at a wall of nearly identical post-it notes, all at nearly identical prices, the ones with the pink ribbons on the packaging stand out. Similarly, I suspect that, when a company creates a product with a cause marketing component, it gives them a hook when negotiating with retailers for the best possible shelf space, which in turn leads to increased sales.

I came across another reason, though, that I think has interesting implications for cause marketers. I'm currently reading Creative Capitalism, the compilation of essays on the title topic, edited by Michael Kinsley. Early in the book, Kinsley has included Bill Gates' 2008 speech at Davos that launched that term into the mainstream (that introduced the term, perhaps?). In the speech, Gates has this to say about (RED): "If you give people a chance to associate themselves with a cause they care about, they will pay more, and that premium can make an impact."

Notice what Gates does NOT say: "If you give people a chance to" impact, or to contribute to "a cause they care about." He says "to associate themselves with", and that's a fundamentally different concept. Association is not about action, it's about identity. I associate myself with a cause when I wear a particular t-shirt (like Gap's RED shirts), when I join a particular group on Facebook, when I slap a sticker on the back of my car. When I take those actions, I may be raising awareness, I may be winning hearts and minds, but let's focus on association - I'm telling people who I am, what I stand for, and what kind of person I want to be.

The fact that (RED) and its ilk seem particularly popular among teens and young adults makes more sense in light of this framework. That population is still in the midst of exploring and trying on identities, so anything that helps someone in this demographic to project his or her identity to peers is attractive.

If Gates is right, this is a really powerful concept. If a marketer can get prospective customers to make a product part of the identity they display to the world, that sounds like a gold mine to me - and the money goes to both the Gap and the Global Fund.

This also suggests that marketers should think about cause marketing in a really different way than I suspect many currently do. Right now, I imagine that decision-making around cause marketing typically goes in one of two ways. Either the company decides to create a product that raises money for a cause with which the company is already affiliated, as an extension of existing philanthropy, or the company decides to run a cause marketing campaign and searches for a cause with which to affiliate. In the latter case, marketers try to identify a cause that it's customers care about - they may use market research to identify this cause, or they may look for causes with the same target demographic as the company (which is why women's clothing stores seem to turn into a uniform array of pink ribbons every October, in honor of breast cancer awareness).

If we take the latter case, the "competition" for the cause-related products (it's awkward to think of it that way, but I think we have to) includes other cause marketing campaigns benefiting the same cause, along with direct donations to the organization in question. It also includes volunteerism or activism that support the cause.

On the other hand, if we buy cause marketing products in order to broadcast our identities, the marketer's job is not so simple. While women, as a monolithic group, might have a common reason to be concerned about breast cancer, they are interested in projecting a wide array of different identities. Women who shop at Coldwater Creek and women who shop at New Balance - both companies are members of the Komen Million Dollar Council Elite - might want to impact the same causes, but they likely want to project very different identities. That said, these two companies aren't trying to attract "women" as a monolithic group, either. They each have very specific target audiences, which can be delineated in part, I imagine, by exactly this issue of identity.

In this case, the competition isn't writing a check - most of us don't write checks big enough to name a building or otherwise make our philanthropy part of our public image. Instead, the competition could be logo t-shirts, or fashion in general, or our Facebook profiles, or the music we play when the car window is down, or any other tool we use to tell the world who we are.

This makes the cause marketer's job much more complicated, and probably more difficult. On the other hand, it gives marketers the opportunity to build a deep and unique relationship with the customer, just the type of relationship that goes beyond a transaction to a partnership.

Why Just Law?

Last week, I wrote a couple of posts (here and here) about law firms deferring starts dates for new hires, and encouraging them (along with recently laid-off employees, in some cases) to take on pro bono jobs, with partial salaries from the law firms. I've been looking for other industries that are doing something similar - that is, recognizing assets that are under-utilized thanks to the business slow-down and loaning them out to nonprofits. Surprisingly, I haven't found much.

The lack of a pro bono or in-kind giving spike in industries other than law made me think about what characteristics would make an industry likely to increase such giving in the face of a recession. For instance, it makes sense to me that the legal firm is increasing pro bono activity for the following reasons:

• According to a recent CNN article, deferring start dates can save law firms $100,000 per associate, even when the firms are still paying a partial salary. I imagine that this comes not just from the high salaries that are common in the industry (according to the same CNN article, the median starting salary for lawyers in private practice was $108,500 in 2007), but also from the high cost of training new hires, along with benefits, overhead costs, year-end bonuses, etc.
• All law firms have to sell is their employees' expertise. As such, they are a critical resource - the firms can't allow this recession to have an negative impact their access to talent, or they won't be able to scale back up after it ends.
• By putting new hires to work in a pro bono capacity, these inexperienced attorneys are getting valuable work experience, reducing the training cost to the firm once they come on board.
• The legal industry has an infrastructure in place to handle pro bono work - many firms have pro bono coordinators, many lawyers have pro bono experience, and many nonprofits have experience putting pro bono lawyers to work.
  

So what are principles can we generalize to other industries? I believe that industries are more likely to donate recession-induced excess capacity if they meet some or all of the following criteria:

• The resource is costly to the firm - if the firm can get even part of the cost off their books, or if it can extract some value out of the resource, it is motivated to do so.
• The resource is valuable to the firm - the firm will absolutely need this resource after the recession. If the firm disposes of the resource, it will take some time to get it back after the recession ends (inhibiting the firm's ability to scale back up); there may even be a risk that the firm won't be able to recapture the resource.
• If the firm donates this excess capacity to a nonprofit, it will extract more value from the resource than letting it sit idle. The process of being loaned out may actually add value to the resource (e.g., in the case of lawyers doing pro bono work), or the donation may have some other positive benefit to the firm (e.g., improved reputation).
• The firm knows how to lend out the resource to a social sector organization; conversely, nonprofits know how to use this resource.
  
  

What other industries fit some or all of these criteria, and have seen their business slow down in the face of the recession, thus leaving their resources underutilized?

It seems to me that finance firms, with respect to their employees, are facing much the same challenges as law firms. Their employees are highly paid and highly skilled, and the firms' essential product is their employees' skill - they really can't afford to lose these people, as they'll be critical to the firms' success when the economy recovers. Putting these employees to work in a pro bono capacity should indeed add value to the employees, as a training exercise, as there are many nonprofits dedicated to issues that are closely related to the work these employees do for banks and other finance companies. Because many firms have a history of donating time and money to nonprofits that work on financial literacy, the infrastructure for pro bono work is more or less in place (if not as well developed as in law). Because this recession is creating increased demand for nonprofits in this field, they should certainly be able to use this donated resource.

So are these companies following the legal industry's lead? JPMorgan put Bear Stearns summer interns to work in nonprofits last summer, but other than that, I haven't seen significant parallels. My gut reaction is that financial firms are in such significant trouble, that they're beyond these kinds of programs - they're saving the people they can to do the work they have left, but they just have to cut costs wherever they can. As a result, they may face some problems when they scale back up, but they don't have any alternatives. Or is there some other reason that the finance industry isn't engaging heavily with pro bono programs?

Consulting is a near-perfect match for law - the hiring process is similar; the types of people hired are very similar; consulting firms also have a pro bono history; their skills are similarly valuable to non-profits; and the nonprofits offer valuable experience for consultants. Furthermore, consulting firms, too, are pushing back start dates. That said, from what I've heard from my many friends going to big consulting firms next year, start dates aren't being pushed back later than January or February; compared to the full year some law firms are delaying their offers, this seems less likely to lead to attrition. (I'd also add that it seems consulting firms have always been pretty flexible about letting employees defer offers to take on short-term positions with nonprofits, even if they don't seem to be creating formal, paid fellowships like the law firms are currently doing.)

Moving beyond skilled employees to other types of underutilized assets, the travel industry comes to mind. Hotels, in particular, might have an interesting opportunity to increase in-kind donations. Much of a hotels' costs are fixed - no matter how empty the hotel is, the company still has to pay for the cost of the building itself, along with desk staff, restaurant staff, utilities, etc. Certainly, there is room to scale these costs down if the company expects occupancy rates to decline, but a big portion of these costs are fixed. As such, I expect that the cost of donating rooms - to Make-A-Wish, for instance, or even to nonprofit employees traveling for business purposes - is relatively low; these additional occupants are only incurring the additional fixed costs (e.g., utilities in the room, additional housekeeping, additional wear-and-tear on the room). While the benefit to the company isn't as clear-cut as better-trained employees, there should definitely be a reputational advantage, if the company communicates its donations well.

Airlines are somewhat similar - the vast majority of costs are fixed (the plane, most of the fuel), so putting a sick kid on the plane, off to visit a specialist, has very low additional cost to the airline. As with hotels, the recession is decreasing demand and leaving seats empty. Unlike hotels, airlines can reduce the number of flights they run, so they can somewhat reduce their excess capacity; however, to the extent that they aren't able to eliminate it entirely, there may be an opportunity to donates these extra seats to nonprofits.

What other industries have seen their business slow down as a result of the recession, leading to excess capacity? Of these, which meet the criteria laid out above, suggesting they may be good candidates for increased pro bono activity or in-kind giving? Or do you have other ideas about what makes an industry a good candidate for such programs? What stands in the way of getting such programs into place?

Thanks!

Update: Pro Bono Opportunities

Yesterday, I wrote about a trend among law firms to put their employees, idle in the face of a recession-induced decline in business, to work for nonprofits. It seems to be a timely topic, as I've come across a few other recent articles on the topic:

Also yesterday, onPhilanthropy.com (where I used to serve as Corporate Philanthropy Editor), published an interview on this subject with Michael A. Rothenberg, Executive Director of New York Lawyers for the Public Interest. One of the concerns I highlighted in my post yesterday was that, as the economy recovers, the pro bono resources will be pulled out of nonprofits which have come to depend on them. This interview points out that a number of the attorneys who take on pro bono opportunities will be working on problems that have been created by the recession, like foreclosures. While the economic recovery may mean that pro bono programs scale back to pre-recession levels, it may also mean that the burden on public interest law organizations is decreased. This makes me feel somewhat better about the sustainability of these programs.

The onPhilanthropy article directed me to this article published by CNN last week. The CNN article gives some good context, including more examples of firms that are encouraging new hires with deferred offers and laid-off employees to go into public service jobs for the time being; it also explains some of the economics that make paying attorneys to work for someone else attractive to law firms. The CNN article refers to students and attorneys with the same big concern that I have - that is, that students who come with a stipend from a law firm will displace those who have always intended to go into public interest law. However, it also quotes individuals that are hopeful that this situation will cause public interest law careers - not just short-term stints - to become attractive to students who might not have otherwise considered anything but corporate jobs.

AmericanLawyer.Com also took on this issue recently, in an article published on Thursday. The article focuses on the logistical challenges of managing this influx of pro bono resources, and the role that the Association of Pro Bono Counsel is playing in coordinating solutions to these challenges. The article also addressing the difficulty - and yet the importance - of matching specific lawyers with specific opportunities, to ensure that both parties truly benefit from the experience.

Have you read anything else that illuminates this subject, or that illustrates a similar situation in a different industry? If so, please post a link in the comments. Thanks!

Recession Special: Pro Bono Opportunities

I just read an article published today on SFGate.com, the San Francisco Chronicle's online edition. It details a trend among laid-off workers to seek volunteer opportunities with nonprofits as part of their job search.

The article reminded me of a conversation I had over dinner last weekend with a friend who is in law school. She's strongly interested in public interest law, to the point that she's not considering taking a corporate job. Before law school, she worked with two nonprofits, one of which provided legal services to those unable to afford it, and she knows for sure that she wants to do this type of work as soon as she graduates from law school.

Over dinner, we talked about the recent trend among big law firms, in the face of the recession, to delay their new associates' start dates. Some of these firms are paying their new hires a partial salary to work in public interest law. According to a post this past Friday on the Wall Street Journal's Law Blog:

"Morgan, Lewis, for instance, has delayed the start date for 68 incoming lawyers by one year, until the fall of 2010. But the firm will pay the lawyers up to $70,000 each if they take on such jobs as litigating at a public defender’s office or providing corporate-law advice to a nonprofit organization. Pillsbury Winthrop has extended a one-year offer to pay salary and benefits to each of 55 laid-off lawyers who takes on a public-interest job. Simpson Thacher has launched a similar program."

On face value, this seems like a great CSR move on the part of the law firms. Because of the business slow-down, companies have a lot of underutilized assets sitting around - in this case, that's employees, but in other industries it might include physical assets, too. According to the WSJ blog post, nonprofits are embracing the opportunity to receive this resource:"But for now, the public-interest world is loving it. 'It seemed like manna from heaven when law firms approached us about underwriting the costs of having [lawyers] work for us,' says Dinah PoKempner, general counsel of Human Rights Watch."

In talking to my friend, though, a big concern came up. She's worried that this move will create significantly more competition for public interest jobs, and that this will affect her job search. I'm worried about the sustainability factor if her concern is realized.

Let's say that incoming lawyers accept such paid "pro bono" opportunities in significant numbers. In year one, this could be terrific for nonprofits - they get access to a significantly larger talent pool, while law firms shoulder some or all of the burden of paying for it. In year two, though, those attorneys go back to their real jobs. Depending on the state of the economy, the nonprofits might get a new crop of untrained employees, or they might get no one.

Meanwhile, the students who were dedicated to public interest careers all along may have gotten boxed out of nonprofit jobs, because they didn't come with a nice $70,000 subsidy. But these are the lawyers who would have stayed with the nonprofits long-term, rather than taking their knowledge and training with them back to big firms, leaving the nonprofits to train a fresh batch of inexperienced new hires. This just doesn't seem very sustainable.

I absolutely commend businesses that recognize they have assets sitting idle and that work to deploy those resources in a way that serves the community. I think this kind of thinking is the source of a major growth opportunity for corporate community engagement. However, I think we need to give careful thought to how we can implement these programs in a way that is sustainable, that won't leave nonprofits in a lurch when the economy picks up and we can once again fully utilize these assets in our businesses.

Does anyone have thoughts or advice on how we can do this, or examples of companies that are doing it well? Thanks!

Engaging Consumers - Starbucks Shared Planet

I was in Starbucks earlier today, and saw an poster with this interesting message:

"You.
Work with 1.2 million people to grow and harvest even better coffee that earns even better prices.

Everything we do, you do. You buy coffee at Starbucks. Which means we can work with farmers to help improve their coffee quality and their standard of living. We call it coffee that is responsibly grown and ethically traded. And thanks to you, we've grown big enough to be able to do this kind of good on this kind of scale.

Good job, you."

The poster ended with messaging for the company's "Shared Planet" CSR campaign, with the tagline "You and Starbucks. It's bigger than coffee."

It looks like Starbucks is attempting to engage its consumers in its CSR activities by drawing a clear connection between consumption and the work Starbucks does with coffee farmers. I find this interesting on a few levels. It's great for Starbucks from a business perspective - in the second to last sentence, the company is basically saying that, the more consumers buy, the more good Starbucks can do. For a company that relies on repeat customers, that's a pretty decent sales pitch. Furthermore, in addition to making consumers feel good about buying one more cup of Starbucks coffee, it also educates them about what Starbucks is doing through its CSR program (at a high level), and specifically about what "responsibly grown and ethically traded" means (though the definition isn't very detailed). For a company that makes social responsibility a core part of its brand, it's critical to do this effectively.

One thing I thought was missing from the poster was a call to action. Reading the poster, I found it rousing - it told me how effectively I was enabling Starbucks to have a positive impact on coffee growers. Getting to the end of the poster, though, there was no way for me to have a bigger impact, other than buying another latte.

I checked out the Starbucks Shared Planet website, though, and saw some of my questions answered. The website offers customers the opportunity to pledge to use their own mugs for their Starbucks coffee (4,733 people had done so as of 6:50 today), as well as a "Volunteer to Volunteer" section, where website visitors can learn more about volunteer opportunities. In particular, the Starbucks V2V area of the website, which has a social networking component, is designed to be "a catalyst for conversation and connection that inspires people to contribute to a cause greater than themselves". I didn't, however, find any opportunity to have an impact on the issue highlighted in the poster - improving the quality of living in coffee-growing communities - via this website.

A few days ago, I asked for examples of companies that engage consumers in their CSR activities. This is a very interesting example of such an initiative. I think it has the potential to educate consumers about Starbucks' CSR, thus possibly increasing loyalty; to make customers feel a stronger relationship with the company; and to increase the impact of the company's overall CSR activities. However, this will all depend on how the initiative is executed. The time and effort of Starbucks customers has the potential to be a powerful resource - how will the company deploy it? I look forward to following this initiative, and also to hearing any of your thoughts on this project in the comments section.

Enjoy the weekend!

Putting Employees to Work

Ever since Google.Org announced its reorganization last month, I've been thinking about the types of resources that companies give away. Basically, companies mostly give away cash, products, or employee resources. Employee resources can be subdivided into time (labor) and talent (expertise). There are a few exceptions (including several detailed in this article that I wrote for onPhilanthropy a few years ago), but most corporate philanthropy (broadly defined) fits into these categories.

Google.Org, in the announcement cited above, suggested that, while it has been pleased with its efforts to support its philanthropic goals via cash donations, it has had the biggest impact when it has donated employee talent. As such, it plans to increase its focus on delivering impact via "engineers and technical talent".

This got me thinking about other companies that really get behind employee engagement as a key part of their philanthropic strategies. Of course, most companies (at least large ones) have volunteerism programs and most make at least some cash donations. However, which companies seek to make a social impact primarily via their employees' skills? What have been the results of these programs?

Thanks so much for your insights!

Engaging Consumers in CSR

I'm interested in learning more about companies that do a good job of engaging consumers in their CSR programs. This includes companies that effectively increase their social impact by getting their customers to work alongside them toward their goals. It also covers companies that successfully use CSR to foster relationships with their customers, in a way that directly serves their business goals.

Does anyone have good examples of such companies or opinions on this topic? Are there any awards that address these types of strategies or resources I should check out?

I'd love to hear your thoughts in the comments section. Thanks!

CRO Magazine's 100 Best Corporate Citizens

CRO Magazine recently released its annual list of the 100 Best Corporate Citizens. Bristol Myers-Squibb is number one this year - after spending last year in CRO's "Penalty Box". (In fact, five of the 8 company's in last year's Penalty Box are ranked in the top eleven this year.) General Mills, IBM, Merck, and HP rounded out the top five. Intel, Cisco, and Starbucks have all made the list each of the ten years it has been released; they are the only companies to do so.

I find the methodology of the report interesting. According to the company, in its statement accompanying the list, "CRO’s 10th annual 100 Best List (compiled by IW Financial and edited by CRO) is completely based on publicly available information." On the one hand, I'm concerned that publicly available information might not fully represent the companies' corporate citizenship programs. As a corporate philanthropy consultant, I did a lot of benchmarking, and I know that I could get significantly more information talking to company representatives than by looking solely at public sources. That said, this methodology may encourage companies to make more information publicly available.

Perhaps most importantly, CRO also reports that last year, "76 companies that fell short contacted CRO to ask what they needed to do to make the list next year." By establishing criteria for what constitutes good corporate citizenship, CRO establishes best practices, providing a road map that companies can follow in a still-evolving field. By publishing the results of its evaluation in a "100 Best" list, the magazine provokes the competitive instincts of companies seeking to eek out an advantage in competitive markets. As such, this list gives us a snapshot of where we stand today, but it may also help us move forward tomorrow.

Have any of you used this list, or another ranking, to evaluate and improve your programs?