Working with the Business Sector

www.grantcraft.org grant PRACTICAL WISDOMcraft FOR GRANTMAKERS

2 The case for engagement

6 Seeking common ground with business WORKING 18 Philanthropy and corporate WITH THE citizenship

22 Forging partnerships across sectors BUSINESS 26 Key lessons from grant makers SECTOR PURSUING PUBLIC GOOD WITH PRIVATE PARTNERS

WORKING WITH THE BUSINESS SECTOR 1 PAGE 2 PAGE 18 Introduction: Philanthropy working The Case for and Corporate Engagement Citizenship Grant makers have plenty of Intended mainly for people with the reasons to engage the private working in corporations and sector — and plenty of reasons corporate philanthropy, this to be cautious. This guide offers section offers suggestions for business suggestions on how people linking business and charitable from business and philanthropy activities in ways that benefit can collaborate, drawing on both. sector experiences from both sides of the table. PAGE 22 Forging pursuing PAGE 6 Partnerships Seeking Common across Sectors Ground with On either side of a business- public good Business philanthropy collaboration, Primarily for grant makers cultural differences, misunder- working outside the corporate standings, and simple inexpe- with sector, this section looks at rience can get in the way of several key questions. How cooperation. With patience and much business involvement in creativity, these can be over- private philanthropy is realistic? What come — or at least managed. kind of involvement should partners you seek? And how can you balance a need to engage business with, in some cases, a desire to change how business is conducted? PAGE 26 Key Lessons from Grant Makers

PAGE 28 Other Ways to Use This Guide SPECIAL IN THIS GUIDE, grant FEATURES makers consider their reasons for bringing business and philanthropy 11 CASE STUDY: Ch anging into closer collaboration and what Business they’ve accomplished by doing Practices so — from changing business 15 Setting Up a practices to enlisting the corporate Foundation- Corporate sector in solving global problems. Partnership Separate sections cover the 16 Building the relevant issues for people working Case in Your inside and outside the business This guide was written by Organization Bettye Pruitt, with assistance from world, while a special section offers Anne Mackinnon and Tony Proscio. It is part of the GrantCraft series. 21 Evaluating tips on bridging the cultural divide. Impact Underwriting for this guide was provided by the Ford Foundation.

Publications and videos in this series are not meant to give instructions or prescribe solutions; rather, they are intended to spark ideas, stimulate discussion, and suggest possibilities. Comments about this guide or other GrantCraft materials may be sent to Jan Jaffe, project leader, at [email protected].

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You are welcome to excerpt, copy, or quote from GrantCraft materials, with attribution to GrantCraft and inclusion of the copyright.

© 2004 GrantCraft

WORKING WITH THE BUSINESS SECTOR 1 Introduction: The Case for Engagement

“We are trying to solve problems here, and it may rant makers have many reasons to be that there are too few resources if we only cooperate with people in the for- Gprofit sector. Foundations frequently work on our own, or there may be a way to do collaborate with businesses to co-fund something better by combining competencies projects or organizations in which they share an interest. In some fields, such as banking or with for-profit companies.” retailing, foundations actively support research and advocacy aimed at changing business —A grant maker on reasons for working with corporate partners practices — work that often focuses scrutiny “I don’t know if collaboration is the panacea or the and pressure on particular firms. Some grant makers actively seek out alliances with latest model, but for some issues — like AIDS in the businesses, forging partnerships in which developing world — the response is going to have to the goals of the two parties are not identical but can be powerfully complementary. be a multisector response.” Some grant-making goals can be achieved —A philanthropic advisor on the need for cross-sector collaboration only with the involvement — and ideally the cooperation — of private industry. As one long-time funder of anti-poverty programs explained, “Many of the resources people need to build a good life for themselves are provided by the private sector. They hire people, they fire people, they put productive facilities in places, they purchase goods and materials. It’s hard to ignore a sector of society that has such a pervasive influence — potentially both for good and for bad.” In his program area, he argues, “if we want to improve people’s life chances, we have to find ways to engage the private sector.”

Some grant makers, of course, are already allied with private companies, as part of corporate foundations. Their grants may routinely be aimed at purposes that are consistent with the strategic goals, expertise, or geographic locale of the company that provides the money. A pharmaceutical company’s foundation, for example, might make grants to improve health care delivery. A financial services company’s foundation might support economic develop- ment in communities where it operates. For the corporate grant maker, the intersection of goals can mean stronger support from the company and access to other assets, such as the knowledge and expertise of the company’s

2 WORKING WITH THE BUSINESS SECTOR THINKING IT THROUGH: ONE GRANT MAKER’S TYPOLOGY staff, its good relations with public and involves not only identifying an private players, and maybe the use of effective treatment but delivering that “In my mind,” writes a grant maker products or services in furthering phil- treatment to millions of people, many who has worked extensively with anthropic aims. of them living in rural areas without business, “foundations engage regular access to clinics or medical business in the following ways”: Reasonable as various forms of coopera- professionals. tion might seem, cooperation is never ■ Double indirect advocacy: a simple. Some alliances raise practical In one case, a foundation persuaded a foundation > funds a nonprofit > and philosophical concerns for both pharmaceutical company to donate to inform government policy > parties. Many grant makers are under- millions of doses of a new, highly that regulates or shapes business standably wary of using philanthropic effective, and easy-to-administer practice. dollars in ways that might appear to medicine for use in disease-control ■ Indirect advocacy: a foundation > promote private gain. Corporations, programs in selected countries where funds a nonprofit > to advocate to accountable to shareholders, may be the disease was endemic. The grant business that it change its practice. reluctant to be seen as dispensing maker then worked with the national money for social goals unrelated to health ministries in those countries to ■ Indirect engagement: a founda- their primary business mission. Each improve their systems for training health tion > funds a nonprofit > to engage side may be inclined to see an alli- workers, administering the medication, business in a project. ance as a slippery slope, leading to and educating the public about the ■ Direct relationship: a foundation > things they would rather avoid — or, treatment regimen and disease preven- works directly with business—for in philanthropy’s case, things that are tion. Together, using their combined example, through joint funding for legally prohibited. expertise and resources, the foundation a project. and the pharmaceutical company were Plus, as several grant makers pointed able to ensure that the medicine was ■ Direct funding: a foundation > out, there exists in philanthropy a ten- distributed effectively. funds certain social elements of dency to “demonize” the private sector. business—a “rare but sometimes “When we started this [collaboration When social and business needs con- helpful approach.” with business] a few years ago,” one verge. In other cases, foundations and grant maker recalled, “we were pretty The typology, he explains, puts their grantees have worked with cor- roundly attacked by colleagues who him in a position to ask “a bunch of porations to design employee training, asked, ‘Why are you trying to partner questions,” such as: recruitment, and retention programs, on with them? You should be beating up the theory that the companies would ■ Which approach is my foundation on them!’” The more legitimate ques- get a more stable, productive workforce, in the best position to pursue? tion for grant makers, he argues, is and people who need work would end “What can we possibly do to influ- ■ What prerequisites should I look up with more satisfying, better-paying ence the way the private sector for in business partners? jobs. The companies say that in-service operates?” For him, the answer training programs and opportunities ■ What public message will my includes strategic alliances with for advancement lead to less employee foundation communicate with each partners in the private sector. turnover, greater loyalty, and lower per- of these alternatives? WHY WORK TOGETHER? sonnel costs. ■ Which approach is likely to achieve When charitable resources require One foundation built a coalition in a results more quickly? corporate resources and know-how. large city involving several companies ■ Which approach is likely to lead to Consider a funder trying to battle a in a single industry, plus labor unions, sustainable change and impact? disease that’s prevalent mainly in poor community colleges, training programs, countries. Controlling the disease local government officials, and other

WORKING WITH THE BUSINESS SECTOR 3 “I feel it’s my funders. Despite some natural ten- to face the need to address problems sions among these participants (the in education, homelessness, and responsibility to be corporations were competitors in the hunger.” And in some poorer coun- constantly asking marketplace; the unions were not tries, government needs support from always in accord with the employ- philanthropy, NGOs, and others in the myself, ‘Are we still ers), the coalition hammered out a private sector to meet pressing social on track with our new citywide employment system for needs. (For more on this line of think- the industry. It included recruitment, ing, try the Web site of Business for [philanthropic] goals training, apprenticeships, opportunities Social Responsibility, at www.bsr.org, here? . . . I know that for promotion and fringe benefits, and or the Prince of Wales Business other improvements to the industry’s Leaders Forum, at www.pwblf.org.) my friends on the basic practices for finding and promot- business side are ing workers. The head of one of the ONE GUIDE, TWO VANTAGE POINTS participating foundations estimated that A grant maker in a private foundation always going to ask he and his colleagues “spent two years says she routinely questions her own consulting with employers’ groups and themselves, ‘Is this stance within any alliance, and that local community organizations as well she expects the same from her corporate good for the company?’ as government agencies to draw up an partners. “I feel it’s my responsibility to agreed structure and priorities for the and they’d be derelict be constantly asking myself, ‘Are we still partnership.” if they didn’t.” on track with our [philanthropic] goals The result was a system that benefited here? Are we letting the interests of [the two groups the foundation especially corporation] overtake the interests of the wanted to help: people seeking entry- people we’re trying to serve?’ I feel if level jobs, and low-level workers who I’m not constantly asking those ques- wanted opportunities for advancement. tions, the balance is likely to tip. I know For the industry, the system provided that my friends on the business side are better-trained workers, a more stable always going to ask themselves, ‘Is this labor force, and a much-improved good for the company?’ and they’d be image as desirable places to work. derelict if they didn’t.”

When the public sector doesn’t do People at corporate foundations see the job. The cases just cited illustrate the opportunities for blending corporate one powerful reason for businesses and and philanthropic interests somewhat foundations to form relationships: to differently. “I take our common inter- fill gaps left by shrinking or inadequate ests for granted,” one corporate grant government resources and services. “In maker said, “even when they’re actually the United States,” said a grant maker thorny and complicated. I have to in a corporate foundation, “there is assume, given my position here, that an acceptance that government is our business and philanthropic interests doing less, so companies have to step are consistent and can reinforce one up to the plate. . . . Likewise in Europe, another. If I woke up every day ques- where governments have traditionally tioning that basic belief, I’d never get done more, now businesses are having anything done.”

4 WORKING WITH THE BUSINESS SECTOR This guide looks at the question of Most readers will find all three sec- business-philanthropy cooperation from tions valuable, if only for gaining a each vantage point. The first section better understanding of the view from views the issues from the perspective of the other side. As a grant maker with grant makers working outside the cor- experience in both private and corpo- porate sector, in private or community rate philanthropy puts it, “It’s kind of a foundations. The second section looks Rashomon experience. When you col- from the perspective of people working lect perspectives and perceptions and inside corporations or corporate founda- beliefs from various stakeholders, you’re tions. A third section tackles issues probably going to come up with a fairly common to both and the sometimes interesting analysis of where and how difficult process of bridging the divide. to invest philanthropic money.”

WHERE THE EXAMPLES COME FROM This GrantCraft guide draws on conversations with grant makers, grantees, consultants, and others in the nonprofit community, and corporate partners in philanthropic initiatives. More than forty people, representing more than twenty- five institutions, generously shared their time in describing and reflecting on the work of finding alignment between for-profit and nonprofit objectives and directing it toward positive social change.

A list of those who contributed is on page 29.

WORKING WITH THE BUSINESS SECTOR 5 Seeking Common Ground with Business

“When it comes to At a time when markets and enterprise might interest them. Some have sup- are widely regarded as central to social ported research to identify areas that changing business problems and solutions, grant makers might have a particular need for busi- practices, advocacy in private and community founda- ness involvement. In other cases, grant tions have increasingly been drawn makers have helped their nonprofit rarely does it alone. to corporations as possible collabora- grantees find the right approach — the For years, you’d have tors. That impulse has been intensified “pitch,” so to speak — to entice business in many fields — especially perennial into support or collaboration. Finding advocacy groups saying philanthropic interests such as human the right expression of “social respon- ‘Stop clear cutting.’ services, culture, housing, scholarship, sibility” may have the double benefit of and poverty — by the withdrawal of attracting a company’s involvement and That didn’t take hold, government from many aspects of engaging the imagination and problem- in part because domestic policy. solving skills of its personnel. One grant maker, for example, real- there wasn’t a set Three approaches to working with ized that, after the passage of federal business. Private foundations and of standards towards welfare reform legislation in 1996, nonprofit organizations have found low-income families were no longer which you were several ways of working with corpora- connected to the welfare agencies tions, depending on the mission and pushing the company.” through which they had previously needs of the various parties. In broad received the package of government —A grant maker on changing strokes, grant makers suggest three supports – food stamps, child care, business practices through basic models for involving businesses in health care, the earned income credit advocacy and new industry standards their work: – that might help them succeed at work and climb out of poverty. Some ■ attracting corporate resources for supports were still available, but there philanthropic purposes was little or no system for delivering ■ collaborating on common projects them. “I began to think of employers as a source of delivering work supports,” ■ seeking change in the business she said, “because that’s where the world workers are.” These aren’t mutually exclusive. Some Businesses, for their part, have increas- projects combine elements of two or ingly come to recognize a benefit in three. But it may be helpful to discuss supporting certain nonprofit activi- the approaches separately, and then ties. The principal expression of their consider examples of how they can be interest has been the “corporate social woven together. responsibility” movement, also called “corporate citizenship” or “corporate ATTRACTING CORPORATE community involvement.” RESOURCES

Grant makers outside the business The most direct and elementary way of world have contributed to the move- working with businesses is to persuade ment in various ways. Some have made corporations to invest (or increase their grants to help nonprofits introduce busi- investments) in philanthropic projects. ness people to issues or activities that If a company already makes charitable

6 WORKING WITH THE BUSINESS SECTOR donations or has a corporate foundation, have made; they may even be willing to this approach might amount to little issue unconventional mortgages, based FOR PROFIT AND BEYOND more than one grant maker approach- a nonprofit’s advance work. As a result, ing another to explore the possibility of the lender has a new customer, and the Why might business be attracted joint funding. But if the business is not grant maker’s philanthropic purpose to the idea of collaboration? Grant already an active donor, or the field is has been advanced. makers and nonprofit grantees point not one in which it has made grants out that for-profit businesses work In another case, a small foundation before, or the requested investment from a range of motivations, and that helped several community arts organi- isn’t a grant — if, say, it’s a loan from a it makes sense to try to understand zations develop more effective appeals financial institution on favorable terms, the norms of the company or industry for corporate sponsorships. The arts or a contract to purchase goods or you’re trying to engage. Notes one institutions had assets that companies services within a specific community, or experienced funder, “Some nonprofit might be happy to sponsor — coffee free or discounted services to grantees organizations approach businesses bars, rehearsal or gallery space, special or community residents — then the from a profit perspective, arguing, events — but the arts groups didn’t grant maker may have to approach the for example, that the company is know how to present those opportuni- company in a different way. missing an untapped opportunity to ties to local businesses. When their sell products and services. Some are Identifying a corporate interest. The efforts succeeded, the businesses not taking a larger view of why firms may challenge in these latter, more complex only made donations but became more have more than a profit motivation — cases is to identify a strategic interest attached to the missions of the organi- some reason to become involved in of the company that the prospective zations and were more likely to make the well-being of their communities.” relationship might satisfy. Sometimes future contributions. “Corporations,” said a community needs goods or services one of the arts grantees, usually “want Briefly, people in business often that the company provides, but the visibility we can’t give them – we’re not align their decisions about social company has been unsuccessful at a major art museum or orchestra. . . . But engagement with one of the following doing business there — perhaps with [the foundation’s] help, we discov- viewpoints: because the company lacks knowledge ered that one exception to that rule is ■ Maximize profits. As economist of the community or has underestimated companies whose products we use or Milton Friedman put it, “The social the potential market. sell on a regular basis,” such as publish- responsibility of business is to ers, refreshment companies, or compa- To help residents of disadvantaged make a profit.” nies that produce or distribute artistic communities get home mortgages, for work. The result of seeking support ■ Do no harm. Maximizing profits example, one grant maker supports from those companies, the grantee says, is a priority, but so is the social work by nonprofits that function “like has been the growth of a small but impact of a company’s actions. a sensory apparatus for lenders. They close-knit group of corporate sponsors go into areas that lenders do not have ■ Two bottom lines. The best busi- that now proudly support the organiza- a history of serving, and they help ness opportunities generate both tion and whose employees regularly determine who are the people who social and financial returns. attend its events. are really mortgage-ready out of this ■ Maximize stakeholder returns. community. Often they do the marketing Dollars first, then deeper involvement. Actively pursue the interests of and find the customers. They train them Often, the reason for pursuing greater workers, communities, and the to be better borrowers. They get all corporate resources is not simply a environment, along with share- their materials ready and then hand the matter of increased fundraising but holder profits. customers off to the for-profit market.” something more strategic: a desire to At that point, banks can make mortgage raise companies’ interest in solving loans that they would not otherwise a problem or pursuing a cause. More

WORKING WITH THE BUSINESS SECTOR 7 “As we were working than just dollars, the desire is to build through which corporate employees can relationships and a sense of investment volunteer to assist people affected by with the county to get among the contributing firms. the country’s economic crisis. better transportation A grant maker who works with com- Finding a non-threatening point of for our target area, [the munity organizations on transportation entry. “Some issues are considered too issues found, somewhat to his sur- political, and companies don’t want to company] started to prise, that a corporate donor gradually be associated with that,” notes a grant realize that this was a became involved in the strategic side maker in a Southeast Asian founda- of the work: “They stayed in touch tion. “Corporations normally shy away community where they with us — presumably to see that their from supporting nonprofits working on could be drawing donation was being used effectively. military studies, human rights, or the But little by little it was more than that. environment, where there is a history more employees and As we were working with the county to of collusion between military, business, customers — but not get better transportation for our target government, and local parliaments. area, [the company] started to realize They tend to leave those issues to the if people didn’t have that this was a community where they multinational corporations and founda- transportation.” could be drawing more employees and tions and to fund less risky activities customers — but not if people didn’t like education and orphanages.” She have transportation. So they started has tried to find creative ways to break sending [company employees] to county down this resistance—for example, by planning meetings with us, and helping supporting an organization of univer- us draw up more professional proposals, sity theater groups that perform on the and just generally acting like part of the subject of peace. team. And it started with a grant.” COLLABORATING ON COMMON Corporate volunteerism. A grant maker PROJECTS engaged in several Latin American countries has seen similar effects but Some grant makers collaborate with pursues a more deliberate approach: business by developing joint ventures in “We’re trying to mobilize philanthropic which companies are direct participants. resources, but we consider volunteerism Funding grantees to work with busi- around social issues and social justice ness. One ambitious example involved to be just as valuable as traditional a foundation and a corporation that contributions. We’re working case-by- was building a new facility in a large case in different countries, identifying city. The foundation was interested in the main challenges that the foundation increasing employment opportunities and civil society are facing that can for residents of the city; the company also attract the commitment of private wanted to form good relationships with volunteers.” This has meant, in Colom- local politicians and establish a reputa- bia, supporting a nonprofit organization tion as a good corporate citizen. formed by a group of entrepreneurs who hope to contribute private-sector In the ensuing partnership, the founda- energy toward the peaceful resolution tion made grants to local employment, of a decades-long conflict. In Argentina, training, and community organizing the foundation supports an organization groups in neighborhoods with high

8 WORKING WITH THE BUSINESS SECTOR rates of unemployment and underem- with neighborhood businesses to create ployment. The company coordinated business improvement districts. The its job fairs and other hiring activities purpose is to help the businesses thrive with the foundation’s community-based and at the same time keep them in the grantees, and then created a center neighborhood, where they provide ser- at its new facility to train entry-level vices and occupy commercial real estate. workers and help them succeed at their To read more about partnerships that jobs and move up the ladder. (For the bring investment to low-income com- grant maker’s reflections on this part- munities, see the Web site of Win-Win nership, see “Setting Up a Foundation — Partners (www.winwinpartner.com). Corporate Partnership,” on page 15.) Building alliances. What makes Identifying issues of common con- these efforts especially ambitious and cern. Employment is not the only far-reaching is the prospect of chang- area where corporate and community ing businesses’ practice or policy in interests can intersect. A grant maker in a more profound way. (Business may a large international foundation helped sometimes have a corresponding goal: grantees in a developing country form to influence the way foundations or alliances with corporations around an nonprofits go about their work.) issue of shared concern: citizen safety and security. “This took the form of In the case of the employment pro- forging partnerships among the police, gram, the foundation plainly hoped city government, and the city’s Central that the company would find that it Business District Association to address attracted better employees, held their issues of crime, street families, and loyalty longer, and earned wider com- governance of the city.” A grant maker munity support by taking the extra in the United States, for example, funds step in hiring, training, and counseling community-based organizations to work people from inner-city areas.

TO CONFRONT OR TO COLLABORATE?

Grant makers and grantees point out that there are three principal motivators for companies to take up a social agenda: values, strategy, and the pressure of regulation or litigation, either actual or threatened. “If you get all three of those running at the same time,” says one, “then you’ve got a chance to get something that lasts from one business cycle to the next. If it’s only one, first, it’s hard to make the move happen and, second, when it does happen, it’s not clear it’s going to be sustained over time. And it’s probably not going to get to scale.”

Yet grant makers who have used a mix of strategies say that finding the right balance is likely to be an iterative process. “By building best practice, to some extent we begin to change our idea of the possible,” suggests one experienced grant maker. “Hopefully we establish what can be done profitably and thereby, through practice, identify what needs to be regulated, or what needs to be subsi- dized, in order to induce the desired business behavior.”

The certification approach, explained on page 13, is one example of striking a balance. Another is grant makers’ follow-up to the passage of the Community Reinvestment Act in 1977, described on page 11. It included, among other things, funding for community activism and underwriting loans to reduce the risk of lending in low-income communities.

WORKING WITH THE BUSINESS SECTOR 9 Suggests one grant maker: “It’s all well company or industry but whose true and good to say to a corporation, ‘Well, costs are borne by society at large. In you should do this because you’ll feel such cases, even the most fervent better about it.’ But if you can connect market theoretician may recognize a that with a bottom-line impact, an need for regulatory, fiscal, or educa- economic impact, you’re going to have tional correction. a partner for life, as opposed to some- Urging regulatory change. To achieve body who will just periodically come in an outcome on the scale of the passage because it feels good.” of the Community Reinvestment Act (see SEEKING CHANGE IN THE BUSINESS page 11), notes one grant maker, “you WORLD or your grantees may need to make the argument to the public sector that Grant makers sometimes adopt goals there’s a gigantic public benefit that that challenge the practices of a busi- exceeds whatever cost is going to be ness or industry — for example, in labor borne by getting all of the businesses standards, product or workplace safety, to do the right thing.” This will prob- or environmental issues. Relations may ably be a long-term undertaking and is become contentious, but the differ- likely to face opposition, not least from ences need not be unbridgeable. As the affected industry. many grant makers have found, a mix of approaches — including but not limited One way to mitigate the problem, grant to advocacy — may be most effective. makers suggest, is to develop support for the change in the business sector Finding solutions to market flaws. in advance of regulation. For example, Some people on both sides of any a grant maker in a medium-sized confrontation between business foundation has the long-term goal of and philanthropy presume that their winning spousal rights to employee disagreements reflect fundamental benefits for same-sex couples. For now, differences in philosophy about free the grant maker is funding grantees markets, wealth, and capitalism itself. who are changing public opinion at That may be true in some cases, but, the local level and working to per- as many grant makers point out, it suade a few leading corporations to often is not. adopt policies without the pressure Classical market economics expressly of regulation. “Equal rights for this accounts for social burdens that may be community is not supported by law,” created by free enterprise but cannot be he notes. “And, as with anything, the corrected by market forces alone. Mar- feds move very slowly – there has to ket imperfections may be the result of be critical mass before they’re going to failures of information or understanding change. So if corporate America says (as when prejudice causes employers that equal benefits are important and to undervalue the possible contribution if local governmental agencies say of some job applicants), or they may be nondiscrimination is the way to go, at so-called externalities, like pollution some point the federal government has or sprawl, which narrowly benefit one to address that.”

10 WORKING WITH THE BUSINESS SECTOR CASE STUDY Changing Business Practices: The Community Reinvestment Act

One well-known model of business-nonprofit collabora- unless they are sure their competitors will do the same. tion has been the cooperation of American financial Regulation, though almost always unwelcome in any institutions and community-based organizations in industry, is the only way to ensure that end. promoting and financing the redevelopment of disadvan- A grant maker who supports community development taged areas. Foundations have played an important role organizations in such partnerships explains the value of throughout the process. business collaboration this way: Financial institutions have a special incentive not typical “The sheer mass of the problem [of deteriorated urban of most businesses: The Community Reinvestment Act communities] is far too great for philanthropy to solve, of 1977 requires them to demonstrate that they extend even if a huge percentage of philanthropic wealth were credit fairly throughout all the areas where they do busi- devoted to this one issue — which it isn’t going to be. ness. Community groups often help financial institutions The private capital markets are vastly bigger than all of find sound credit opportunities in poorer sections of their philanthropy combined, and they have more expertise to market area. In return, the community groups may offer this field than foundations could amass anywhere enlist the institutions’ expertise in helping developers else. And anyway, poor neighborhoods don’t want to be and nonprofit organizations design financially viable charity cases, they want a fair chance at participating projects. Since CRA was passed, funders, grantees, and in the normal economy like everyone else. Now, banks bankers have developed new methods of finding and wouldn’t exactly be tripping over each other to capture preparing borrowers, new kinds of mortgages, and new this part of the market, obviously. For that, we needed provisions in the national mortgage-capital markets to federal regulation. But once that happened, foundations fuel this branch of lending. Foundation-funded research took the opportunity to help their grantees acquire the and innovative programs by lenders and their corporate skill to work effectively with the lenders. With our help foundations have led to dozens of new ways to meet the they created more and more opportunity both for their law’s mandates and extend credit — by now hundreds of communities and for the lenders’ regulatory compliance. billions of new dollars — into poorer communities. Over a couple of decades, they have made things happen For years before the passage of the Community Reinvest- that are far beyond what philanthropy would ever have ment Act of 1977, community organizations had pro- been capable of.” tested the scarcity of bank branches, loans, and financial When a few members of Congress mounted a major services in poor neighborhoods. Urban historians and challenge to the law more than a decade after its passage, economists had demonstrated a pattern of bank “redlin- banks and a few others supported the repeal effort, but ing” in such neighborhoods — that is, simply refusing to the anti-CRA forces were not nearly so unified or strong as do business there — over many decades. Although banks they had been in 1977. Subsequent efforts to repeal the formally opposed the Act at the time (and many continue Act still arise from time to time, so several grant makers to do so), some bankers privately recognize the practice have found it prudent to support research and public- of redlining as a classic market imperfection: Most banks information projects to document what CRA has achieved. will not willingly invest in low-income communities

WORKING WITH THE BUSINESS SECTOR 11 Creating economic incentives. to serve this population is with some Changing the way businesses behave subsidy – for example, a tax credit to can also mean creating incentives lower the hurdle for companies to serve that reward better behavior, rather this market.” than mandates to compel change. For example, a U.S. grant maker is working In another example, a national founda- with a group of financial institutions to tion collaborated with a group of large understand the services they provide employers and a managed care trade in low-income communities. “We’ve association to establish a new nonprofit, supported grantees who wanted to dedicated to improving the quality of collect very specific financial data on managed care. With foundation and whether or not these institutions can corporate support, the organization serve the population profitably. If the developed a system for gathering perfor- answer is yes, that’s great, and hope- mance data from health plans on a wide fully the institutions will do it because range of clinical indicators — childhood there’s profit in it. If the answer is no, immunizations, for example, or asthma that creates a public policy agenda. and diabetes management. Accreditation Because it then suggests that, based is voluntary, but health plans have an on the best judgment of some twenty incentive to participate, since they gain financial institutions, the only way an advantage in competing for the busi-

WHAT THEY DID – HOW THEY DID IT Learning the Business

Making common cause with people in the business sector often involves learning more about their industry — a process that takes time. One example comes from a grant maker who wanted to improve the quality of news reporting by commercial broad- casters. “It was my feeling,” he recalls, that if we wanted to affect the media, we wanted to go for the big players. We could have worked with independent media, but their audience is smaller and much more insular. I was looking for something larger.”

At the same time, he realized that the industry’s own ethics meant that journalists would be skeptical about working with him. In his words, “One of the big issues we really had to be aware of was that mainstream journalists are fiercely protective of their independence. Anything that sounds to them like you’re trying to influence them, they will immediately react to quite defensively — and offensively, as well. They will attack.”

As a first step, the grant maker decided to support a group of nonprofit organizations that were trying to promote diversity and ethical standards in the newsroom. Through that work, he began to hear from journalists who were concerned about new financial pressures, intensified by industry consolidation, to meet quarterly earnings targets: “The pressure cascades down the system and eventually hits the newsroom and the journalists, who have to decide, ‘Do we do this because it’s important journalism, and it costs a lot of money to do? Or do we go this other route, because it will increase ratings, even if it’s not going to be very meaningful?’ ”

Understanding the market from broadcasters’ perspective put this particular grant maker in a position to sponsor research on how economic pressures were affecting television and radio program directors — research that was relevant to what journalists were actually experiencing. He has also funded meetings for industry CEOs to discuss ethical issues and corporate social responsibility.

12 WORKING WITH THE BUSINESS SECTOR ness of employers and other purchasers of managed care contracts. WHAT THEY DID – HOW THEY DID IT Mobilizing consumers through certi- Working with “Leadership” Companies fication. One way to enlist consumers Businesses, like most other organizations, pay closest attention to what their directly in the cause of business reform peers – and especially their competitors – are doing. Hence, the potential for involves certification — that is, letting a cross-sector partnership to have impact is much greater if a major industry consumers know when companies’ player is an early adopter and advocate of change. In the corporate social production and distribution methods responsibility movement, a small but growing number of such companies – meet standards of social responsibil- particularly global corporations and companies based in western Europe – ity. Some or all of the companies in are playing leadership roles. an industry may be willing to confer with nonprofit advocacy groups and In the words of a grantee active in the social responsibility movement: “You others to set achievable standards for start meeting with an industry leader and you actually create the potential for producing goods that are, for example, systemic change as a result of that. That doesn’t work everywhere, but it does “eco-friendly” or “sweatshop free.” The work more and more. Sometimes, you actually hear businesses start to say, advocacy groups may also bring the ‘We’ll leapfrog over this question. We want to be the market leader on this.’” issues directly to public attention, to As the banner example, she notes the conversion of the do-it-yourself home create an awareness of standards and improvement giant Home Depot, Inc., to environmentally friendly wood products. which companies are meeting them. Under intense pressure from sustainable forestry advocates, the company first A grant maker who supports environ- created a single line of “green” products. As more and more customers called to mental causes found that certification ask about it, the grant maker says, “they woke up and realized, well, if we’re could be a powerful way of drawing selling one line of wood that’s sustainably harvested, we’re basically saying corporate attention to problems that ‘We’ve got one good product and the rest of our products are killing the planet.’ would normally lie outside companies’ That’s tough to brand, isn’t it?” market calculations. “The breakthrough Home Depot has publicly committed itself to being an environmental leader came when some very smart people and is increasingly using wood products certified by the Forest Stewardship in environmental advocacy groups Council — making a huge impact on the forestry industry. began to realize that you could iden- tify the market into which a company For more on grant makers’ role in supporting certification and the sustainable was selling. And if the way they were forestry movement, see the GrantCraft video Funders Collaborative, available producing the product was socially through www.grantcraft.org. unacceptable, you could go to their customers and say, ‘Do you want to be associated with the purchase of this ness people may share the desire of socially and environmentally unac- grant makers and nonprofit groups ceptable product?’” The result, the to solve problems. As leaders of com- grant maker said, was that companies panies, they may be persuaded that began to seek ways to earn certifica- business shares some responsibility tion in order to have their brand name for desirable social outcomes — but associated, in consumers’ minds, with they may not want to shoulder that desirable practices. responsibility alone.

Finding a business interest in One grant maker, the founder and social goals. It is also crucial to head of a small family foundation, remember that, as individuals, busi- wanted to continue to advocate for

WORKING WITH THE BUSINESS SECTOR 13 the employee-friendly policies that assessment and found that busi- had been a hallmark of his business. nesses want to do this but don’t know In addition to giving 25-30 speeches how,” he recounted. The organization on the subject each year, he funded produced a handbook and Web site on the creation of a nonprofit focused how to create family-friendly programs on helping small and medium-sized and build employee morale and loy- businesses improve policies toward alty “without spending lots of money employees. “We did a detailed needs on consultants.”

14 WORKING WITH THE BUSINESS SECTOR WHAT THEY DID – HOW THEY DID IT Setting Up a Foundation-Corporate Partnership

When private foundations seek alliances with business, they opportunities, apply for jobs, and get training and family often do it through their grantees rather than on their own. assistance. But that’s not always the case. One foundation, for example, In the end, the goals were largely achieved. But there were sought out a direct partnership with a large retail developer, many rough spots and some disappointments for both sides. in hopes of creating employment opportunities for low- The grant maker and consultant offer these lessons from income residents of a city where the developer would soon their experience: be opening a new mall. The company had promised the city that it would give at least one-quarter of the jobs in the mall Don’t assume that support from the CEO is all you need. to residents of low-income neighborhoods. The foundation “We made an assumption,” says the grant maker, “that wanted to ensure that people who most needed and wanted because a top executive understood that his company could the jobs would be able to apply, get training, and succeed achieve a social impact and advance its bottom line, the once they were hired. company as a whole shared that vision. That wasn’t so. So one lesson is, when partnering with a particular company, It was, in many ways, a natural fit between corporate and it’s important to have not only commitment and leadership foundation interests: the company needed to hire the very from the top, but also from other people in the company, people whom the foundation sought to help. Still, as a consul- particularly in the areas of the company that are going to be tant who helped broker the partnership pointed out, the grant key to the success of the project.” maker was “very clear about where she drew her line: She was not going to put major dollars into anything that merely Learn about the company’s business. “It would have helped the company satisfy its obligation to the city. She said helped us to understand the fundamentals of firm’s business from the beginning, ‘We are in business to help the com- model better before we started,” the grant maker believes. munity organize itself around the opportunities that might be “For example, a key part of their business rationale was that created by this development.’” the jobs program would make this mall attractive to retailers, because it would ensure a reliable source of employees at a The consultant was the foundation’s main agent in setting up time when the job market was very tight. We had developed the partnership. Because there were many necessary partici- this understanding with the development side of the orga- pants in the ultimate arrangement — the city’s employment nization, but in fact it was the leasing group that dealt with programs, community groups, various divisions of the devel- retail tenants. If we had known the structure of the leasing opment company, and other local agencies — the consultant agreements, we would have recognized the importance of spent considerable time “working closely with the company getting senior managers from those units engaged from the and with the community to inform many, many people. We outset.” had a lot of community and public meetings.”

Where the partnership became critically important, and Produce a simple, written summary of responsibilities. where the consultant had to work hard to accommodate both “Foundations tend to be more into process, and companies the company’s interests and those of the foundation, was in are not,” she adds. “The developer was on an 18-month coordinating the application process and the hiring, training, timeline to get this mall from being a place where there was and retention of new employees. The foundation’s goal was a sign in the ground to having thousands of square feet and to make sure that people who would otherwise have been people working in it. So our saying ‘Let’s have meetings, talk left out of the job stream — people who had little information about roles, and put together a memorandum of understand- about job opportunities or who had no transportation or child ing’ would have been a nonstarter. But it might have been care, or who might have family problems that could interfere useful to draft something and send it to the top executive with their job performance — could get help both before and of the company and say, ‘This is our understanding of what after they were hired. For that, the company agreed to create we’re doing together,’ and make sure that the eight or ten a special office at the mall where people could learn about people who were involved all got a copy of it.”

WORKING WITH THE BUSINESS SECTOR 15 BUILDING THE CASE FOR COLLABORATION IN YOUR ORGANIZATION

FOR A PARTNERSHIP WITH BUSINESS ■ Be pragmatic and offer a carefully researched case. Some business practices create social prob- Grant makers in independent foundations may find lems. It is important to work on changing those that the first challenge in working with business is and on harnessing the considerable strengths of persuading their own institutions that an alliance is the corporate sector in forming a solution. Docu- a good idea. Colleagues, superiors, grantees, or other menting both the troublesome practices and the observers may react skeptically, whether because opportunities to change those practices — with as of philosophical reservations, concerns about legal much objective evidence as possible — is crucial. propriety, or a simple belief that the two sides’ goals Citing what businesses can add to the mission are too different to make a real partnership practical. may be a big plus. Solutions that rely entirely on Those concerns can be addressed, say grant makers government funding and nonprofit vendors tend to who have navigated them. be, as another person put it, “resource-limited and fragile” because of their dependence on political In one case, a grant maker recounts, “I really felt, if will. Or, to quote another grant maker, “Bringing we were going to work in health care, we needed to business into the equation opens up the possibility work with health care providers and funders — and of more robust solutions.” if that meant just nonprofit providers and funders, we’d be ignoring two-thirds of the relevant universe. ■ Emphasize that businesses may welcome the It seemed irresponsible and naïve not to try to find partnership. A large share of foundation donors some common ground with the industry. But when and trustees are successful business people, who I started discussing what I thought was an obvious may have reservations about “reforming” busi- idea, Whoa! Suddenly I found myself in the middle ness or “holding the private sector accountable” of everybody’s attitudes toward health care corpo- on social issues. Anticipate a negative reaction rations and HMOs. Person after person was saying from that quarter, say some grant makers who to me, in effect, ‘They’re going to swallow you up! have faced those objections. Think carefully about They’ll eat you for breakfast!” why businesses might want to work with you and would benefit if they did. Not all reactions are likely to be as strong — and, in fact, says another grant maker, “often the attitudes to ■ Make the case in the foundation’s own terms. A worry about are the ones they won’t express to you. grant maker responsible for the health portfolio of They might raise their eyebrows, and ask about ‘mis- a venture philanthropy, for example, understands sion creep,’ and say, ‘Have we explored other ways of that her organization values “this notion of using doing this?’ but they won’t just look you in the eye and different financial instruments and tools as part say, ‘I don’t like the idea of dealing with a for-profit of the philanthropic process.” Knowing, as well, company on this.’” that the board is interested in supporting work in developing countries, she proposed a start-up loan Whatever the source of colleagues’ skepticism, it’s to a company in Africa that produces anti-malaria important to address their concerns frankly and with bed nets for local distribution. By contrast, a grant careful thought. “The truth is,” said the grant maker maker in a U.S. foundation — one with a strong in health care, “they had real concerns, based on interest in national health policy — overcame her real experience, and I needed to show them I had organization’s reluctance to collaborate with a for- real answers.” profit nursing home chain (on a project to improve Grant makers in private foundations who have faced the quality of nursing home care) by citing the similar challenges offer these points of advice: company’s influence in the industry.

16 WORKING WITH THE BUSINESS SECTOR FOR A PARTNERSHIP WITH PHILANTHROPY that the philanthropy provided no lift for the com- pany itself. That seems counterproductive.” This Grant makers working in corporations sometimes grant maker pointed out to colleagues that even find it hard to get attention and cooperation from their the purest individual charity normally springs business colleagues or senior management — not from people’s particular values, talents, and com- because their civic activities aren’t valued but because munity relationships. A corporation need not be they aren’t valued enough. Colleagues may need embarrassed about citing those same motivators persuading that the company’s philanthropic work is for charitable activity. “Otherwise,” said another worthwhile, not just for its moral goodness or as a way grant maker, “people start to think up their own of placating critics but because it benefits the company. explanations for why you’re active in philan- thropy. The things they imagine can turn out to “To really have their attention,” says one corpo- be wrong and unflattering.” rate grant maker, referring to corporate managers and executives, “it’s got to be more than ‘We want ■ Involve colleagues from within your company. good P.R.’ A project needs to be related to a busi- A grant maker in the corporate foundation of a ness need or a business priority for the company.” pharmaceutical company was planning a program Examples that some grant makers cited are activities of grants to regional community health organiza- through which the company’s brand name comes to tions to combat HIV and AIDS. As the grant maker be associated with values that it considers important, described her approach, “I pulled a working group such as literacy, science, creativity, or healthy com- together and basically put these ideas out there to petition. Other examples include efforts to improve see if there was some resonance.” She then called the physical or economic condition of communities on various colleagues within the company to tap where the company has facilities, or programs for their knowledge and serve as technical resources. families and children that benefit employees and A colleague in the company described the process their families. this way: “From the start, she was looking toward building an interest base across multiple areas Conversely, some business colleagues may be uneasy within the company. By the time she presented with the idea that philanthropy and business interests it to our foundation board, she was able to say, should intersect at all. Isn’t philanthropy supposed to ‘Here’s the team of people who’ve been involved, be pure and un-self-interested? Tax-exempt chari- and here’s what they see coming out of it.’” table activities do have limits, and by law they must not directly serve a profit-making purpose. Still, many ■ Learn about measurement techniques and their legitimate charitable activities also create a better envi- limits. Corporate grant makers are often asked to ronment for the company and its employees and show demonstrate the business value of their proposals. commitment to good corporate citizenship. One attendee at a grant makers’ conference offered this reflection: “We had two days of looking at dif- Experienced corporate grant makers offer a few pieces ferent measurement methods, but there is nothing of advice: clear cut. There is frustration that there’s not some- ■ Don’t be shy about aligning your grant making thing quick and dirty with which to demonstrate with corporate interests. “One of the observations business value.” It pays to know what techniques that I had early on,” recalls one grant maker about are out there, and their strengths and weaknesses, starting work at a corporate foundation, “was that when making a case for a philanthropic partner- the company had so exaggerated its desire to keep ship. For more on this topic, see pages 19-21. its philanthropy separate from its core business

WORKING WITH THE BUSINESS SECTOR 17 Philanthropy and Corporate Citizenship

“Companies are For grant makers working in the busi- ■ being creative about deploying ness world — whether in a corporate resources other than money recognizing that foundation or in the civic or commu- ■ gauging economic and social return nity relations department of a private you can’t have on philanthropic investments company — aligning business interests philanthropy over with the public interest is a normal part Typically, grant makers employ these here, and that’s your of life. Even when a company supports tactics in combination, as they develop activities that are completely unrelated projects, forge the necessary alliances, do-good piece, and to its business operations — when a and sustain their own organization’s then the rest of manufacturer funds a music festival, for commitment over time. example, or a shipping company sup- business just does ports local schools — it usually hopes LINKING TO STRATEGIC GOALS that its customers, employees, and the business.” For grant makers, the challenge in neighbors will see the contribution as a building a relationship between —A grant maker in a sign of goodwill and the company as a civic and business goals is to find an corporate giving program good citizen and principled employer. approach that fits the company’s core But some corporate grant makers also values, history, and strategic interests. envision a more fundamental relation- “First and foremost, in strategic phi- ship between a company’s philanthropy lanthropy the grant making project has and its for-profit operations. Though to work for the company,” says one far from being universally adopted, the experienced corporate grant maker, “so concept of “corporate strategic phi- you need to build and maintain strong lanthropy” — grant making linked to relationships within the business.” She the strategic business objectives of the explained what she does to earn the firm — is growing in importance, in tan- respect and attention of her colleagues: dem with the corporate social responsi- “Within a company, the most important bility movement. “I don’t know if it’s the constituents are the business units — thing of the moment,” notes one grant the profit centers. But it’s often hard to maker, “but companies are recognizing get their attention for the kind of work that you can’t have philanthropy over we are trying to do, in part because here, and that’s your do-good piece, they don’t have the technical expertise and then the rest of business just does in this field to know that grant making the business. You have to think about is more than just giving money away. your social responsibilities in every part What the corporate grant maker needs of the business. And it all needs to be to do is to educate senior executives to interwoven and combined.” the contribution philanthropy can make, Corporate-sector grant makers pointed and the best way is by example – then to three skills that strengthen their other managers will turn to you for help work and help them communicate in new situations.” effectively with colleagues on the This same grant maker cites her own business side of things: experience with a global oil corpo- ■ linking philanthropic objectives to ration. In a project to build a new the strategic goals of the company facility in a country emerging from

18 WORKING WITH THE BUSINESS SECTOR a Communist system, the operating tionship to organizations that would managers — most of them trained as not be considered for a grant. “Most GOOD GRANT MAKING engineers — were convinced of the of our grantees don’t consider us a BUILDS TRUST need to invest in “hardware” infrastruc- big funder,” says a grant maker with In their business operations, most ture on the ground. They were less a regional health care company. “But companies work hard to win their clear about the need for investments they call us for all kinds of things that customers’ trust. They don’t always in “software” – people to run the new they might not ask of another funder — realize that winning trust is also a facility once the start-up team left. The meeting space, recommendations challenge in corporate philanthropy. grant maker identified and enlisted about contractors, special health care local nonprofits to help prepare people programs for residents of the neighbor- Business executives may believe for the jobs the company was creating. hood, that kind of thing. It builds that generosity always begets Based on those results, the manage- a relationship with the community goodwill — something most grant ment team for a new project asked her we couldn’t buy even with much makers know isn’t necessarily so. “If to join them in the up-front planning for bigger grants.” you build a new museum because a new facility in southern Africa. the company president’s brother- GAUGING “RETURN” ON in-law wants it,” one grant maker “For any kind of company going into PHILANTHROPY warns, “you will create cynicism.” a new area,” she says, “there will Being open about grant-making be the challenge of dealing with the Grant makers trying to advance cor- criteria, inviting comments or advice local people and their government. A porate strategic philanthropy largely from nonprofit or civic groups, and grant maker can bring a more strategic agree that the major hurdle is produc- articulating a philanthropic vision view – a strategy – and the skills for ing objective evidence — the kind of for the company can all be helpful in doing this.” evidence business people are used to linking corporate grants with public dealing with in their own work — that DEVELOPING BUSINESS RESOURCES understanding and support. it is truly possible to “do well by doing For grant makers who would like to good.” Many researchers, in business forge a closer connection between their schools and in philanthropy, have taken company and the wider community, an interest in measuring “social return opportunities may be found beyond the on investment” in social causes, using corporate grant budget, in the people methods that businesses would easily and expertise of the company itself. recognize. But the research has met Skilled volunteers from the ranks of with only partial success. In the pro- employees, invitations to participate in cess, in fact, it has uncovered a number company seminars or training sessions, of problems with the idea. or opportunities for grantees or their It would be a mistake, as one business clients to visit the company or use its school expert put it, “to presume that facilities — all of these create a rela- you can justify everything in philan- tionship between civic and business thropy — or even most things — in terms interests that contribute to goodwill and of measurable economic value. When offer material benefits to grantees. you bring music or art to inner-city kids, Few grantees would consider in-kind or ease the social stigma of a disease, support to be as desirable as a grant. or help elderly people stay mobile and But direct services can be a good independent longer — sure, there are supplement to financial support, and some economic consequences to that, they can extend the company’s rela- and you can measure them. But if you

WORKING WITH THE BUSINESS SECTOR 19 claim you’re measuring what those to reason that most companies things really mean, you’re cheapen- would be more interested in the ing your work, and you’re not fooling construction of a new clinic than anybody in business.” in paying researchers to study the benefits of that clinic over several One hurdle to get over when devel- years. But that is beginning to change: oping measures of value, suggests “Companies want to know what differ- another corporate grant maker, is that ence they’re making,” says an execu- “many corporations are loathe to spend tive with grant-making experience, a lot on evaluation, as it’s not clear “and management wants to know that what benefits accrue back to the com- they’re not just frittering company pany for such expenditures.” It stands money away.”

More on Making the Case

Corporate grant makers recommend the following sources:

“The Virtue Matrix: Calculating the Return on Corporate Responsibility,” by Roger L. Martin (Harvard Business Review, at www.hbr. com), on helping companies assess the value and anticipate the consequences of socially responsible corporate behavior

People and Profits? The Search for a Link Between a Company’s Social and Economic Performance, by Joshua Daniel Margolis and James Patrick Walsh, for research on the business case for “doing well by doing good”

The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation, by Jed Emerson and Shelia Bonini (www.blendedvalue.org), on investing to generate a blend of economic, social, and environmental value

Hidden Agendas: Stereotypes and Cultural Barriers to Corporate-Community Partnerships (www.Igicommunications.com), by Laufer Green Isaac, for insights gleaned from focus groups with corporate executives and nonprofit leaders on how cultural stereotypes can impede collaboration

20 WORKING WITH THE BUSINESS SECTOR Evaluating Impact

In 1994, the philanthropic staff of six global corporations came together to develop an approach to evaluating their community investment programs. They became the London Benchmarking Group. Since then, the group has expanded, shared its work more broadly, and funded continuing research on the question of impact.

Recognizing that a company’s motivation for making community investments will shape its need for and approach to measuring results, the group produced the model shown here. In this framework, the need to demonstrate business benefits becomes stronger from the top to the bottom of the triangle. The middle two categories — community investment and commercial initiatives in the community — are the province of strategic philanthropy.

Intermittent support to a wide range of good causes in response to the needs and appeals of charitable and community organizations, Charitable increasingly through partnerships between the company, its Gifts employees, customers and suppliers

Long-term strategic involvement in community partnerships to Community address a limited range of social issues chosen by the company in Investment order to protect its long-term corporate interests and to enhance its reputation

Activities in the community, usually by commercial departments, Commercial Initiatives to support directly the success of the company, promoting its in the Community corporate brand identities and other policies, in partnership with charities and community-based organizations

The core business activities in meeting society’s needs for cost- Business Basics effective goods and services in a manner which is ethically, socially and environmentally responsible

The London Benchmarking Group model

In addition to looking more closely at corporate motivation, the London Benchmarking Group introduced a model of inputs and outputs aimed at capturing the full range of what might be measured to assess benefit. For example, a youth training program in one city received an input of £800,000 in direct grants and in-kind contributions of computer equip- ment. It produced outputs of a £3.6 million matching grant from a government-funded training program, 250 youths trained each year with an 80 percent post-graduation employment rate, and, for the company, a local reputation as a good citizen and the opportunity to hire well-trained employees.

The value of having such a measurement tool goes beyond proving the business case for strategic philanthropy, suggests David Logan, a former corporate grant maker and lead developer of the model. “It also enables companies to understand and communicate not just what they give but what they accomplish.” Adds Logan: “The reality is that companies have rarely been involved in measuring impacts for either the community or the business. They have been happy, for example, to donate computers to schools without seeking to measure whether they improve the learning or examination results of the pupils. The fact that these computers may be chronically under-used, due to a lack of teacher training or technical support, is not picked up in the simple input-only analysis that dominates corporate community measurement and reporting.”

WORKING WITH THE BUSINESS SECTOR 21 Forging Partnerships across Sectors

“We’ve got these Certain challenges that confront urged the importance of one crucial skill business-philanthropy partnerships in dealing with these “personal and caricatures of one are common to both sides. The most organizational habits” that divide the another, based on obvious is the fundamental cultural two sectors: awareness. There are difference between for-profit and not- no tricks, several people said, for little fragments of for-profit organizations, which serve simply “translating” the methods and experience.” different purposes, produce different vocabulary of philanthropy into those benefits, use different tools, and are of business, or vice versa. Instead, they —A grant maker on bridging often staffed by people with different suggested, it’s necessary to be aware, the cultural divide professional backgrounds. throughout your work together, of the reactions, interpretations, and predilec- “Philosophy” is not necessarily on the tions that are likely to influence the list of differences. Grant makers who other side, and then to try, where pos- have worked on either or both sides of sible, to think about your concerns and the divide point out that, while philo- interests from the other point of view. sophical differences may come up, cultural differences between busi- Here are some methods grant makers ness and philanthropy are too easily suggest for working through cultural mistaken for differences of principle or differences and making the most of values. Says one: them:

“Business types often think that we [in Create forums for discussion and foundations] don’t value enterprise, learning. Bringing people together competition, economic incentives, even is arguably the most important contri- capitalism itself. We think they don’t bution grant makers can make, on care about vulnerable people, com- many fronts. As one grant maker mon assets like the environment or recounts, for example, “The power of schools, or frankly anything other than fact-finding site visits for corporate money. We’ve got these caricatures of leaders can be huge — and it helps one another, based on little fragments build social capital in both sectors.” of experience. Sure, our vocabularies If the divisions between partners are are different, our methods of analyzing profound, suggests one grant maker, problems, sometimes our reaction to “a lot of the stakeholders are probably hierarchy or teamwork or government looking for a place to come together or whatever — all of those personal and and have some conversation. Founda- organizational habits really do come up tions can definitely be a safe haven to and sometimes raise big problems. But bring people together and have that right and wrong? Ethical or not ethical? conversation. And by the way, it doesn’t Public interest vs. private interest? It’s cost a whole lot of money, either.” surprising how often those deep ques- tions aren’t really an issue at all.” Encourage business leadership. In the business community, new ideas tend MAKING CONNECTIONS ACROSS to get the best reception when they CULTURES come from peers, so bringing business In a word, grant makers in both cor- leaders together can be an effective porate and independent philanthropy way of building momentum behind a

22 WORKING WITH THE BUSINESS SECTOR social agenda. The convening power The best grantees are those who are of foundations can make that happen. already eager to try the new idea and In an example from Southeast Asia, a have some natural advantage or skill group of six grant makers – one work- that will help them succeed. Grant ing for an international foundation, the makers counsel strongly against prod- others in local corporate foundations ding unwilling partners into “shotgun and community development offices of marriages.” Instead, they offer these global companies – assembled a group suggestions: of local CEOs. “We assigned ourselves Support pioneers in the business one or two CEOs each, just to share community. When business people step the idea about getting together, and to out of familiar roles to lead on social say that this was noncommittal and all issues, foundations can help them make that. Because each of us knew certain connections that advance their work. CEOs and approached them personally, For example, an international grant they were very interested.” The CEOs maker working in Latin America helped created a membership organization to a group of Colombian entrepreneurs study and promote corporate social bring their business perspective and responsibility. Says the international resources to bear on the problem of grant maker, “It was sort of using the violence in their country. The grant clout of the foundation to just add a maker helped them to organize meet- little bit of legitimacy to what people ings on the role of the international wanted to do.” community in peaceful conflict resolu- Cultivate nonprofit leadership. Just tion in Colombia and the role of the as business executives tend to be most United Nations in mediating between receptive to new ideas from peers, the government and the violent forces. nonprofit leaders may be more likely to His foundation’s support lent credibility think differently about alliances with to their efforts and brought the busi- business when they talk to people from ness sector into an important national other nonprofits. One grant maker who conversation. participated in such a discussion was Help nonprofits strengthen incipient impressed when grantees who had alliances. Often, promising partnerships worked with business were willing between business and nonprofits arise to “talk pretty openly about how they not out of a deliberate, planned strat- overcame their distrust and how they egy, but because of an ad hoc project worked through problems that arose, or a coincidental meeting of minds, or and still not sound like they were because a few individuals from busi- sugar-coating the whole thing.” ness and community organizations happen to form a productive relation- FUNDING GRANTEES WHO ARE ship of their own. When funders spot “NATURAL EXPLORERS” these spontaneous alliances, they can As with practically any attempt to do sometimes encourage and help enlarge something new in philanthropy, a good them — even if the sponsoring organi- part of the formula for success comes zations were not at first attempting to down to picking the right grantees. build a cross-sector program.

WORKING WITH THE BUSINESS SECTOR 23 “These relationships take time, and taken much note of the service in the quite often they need to grow slowly,” past, largely because the benefits were one grant maker suggested. “Instead spread across the whole industry, but of saying ‘Let’s build a big initiative also because the economic value was around working with the health care realized only in the absence of a fore- industry,’ which will just scare every- closure — a true economic return, but one and raise the pressure level, it may not an obvious one. The grant maker be more effective to say, ‘You’ve got used the research findings as an occa- something going with this hospital; sion to convene the parties and argue let’s see if you can work up some- that the service warranted support from thing similar with another hospital the companies that were benefiting. across town — and we’ll fund you for “One of the things you can do as a foun- a year to try it out.’ Then if it works, dation,” the grant maker said, “is say, maybe you’ve got an initiative. And if it ‘Let me try to show you the value you doesn’t, you still have people who are can garner from this process.’” getting to know one another better than Appeal to reluctant partners. Some they did before.” business and nonprofit leaders who PLAYING THE FLEXIBLE BROKER have tried to reach out to the other side have found it hard to get a hearing. In Because of their financial indepen- some cases, they say, the connection dence, foundations have a unique could benefit from a bit of diplomacy position at the intersection of nonprofit or outreach by a grant maker whose and for-profit worlds. They cannot be foundation is respected by both sides. considered disinterested parties by either side, notes one grant maker, but One case in which this might have they are not seen as self-interested helped involved an executive from a either. “They can have a role in raising financial services company who wanted consciousness among the stakeholders to help low-income families cross the as no one else can,” adds a grantee. “digital divide.” He envisioned working with one of the large computer manu- Commentators for this guide suggested facturers to provide hardware, software, three areas where grant makers — both and broadband connections to lower- independent and corporate — can income families. To him, it seemed a encourage alliances between nonprofits natural point of tangency between and business while working, in a sense, business and good corporate philan- from the sidelines: thropy. Unfortunately, the computer Support research and help dis- firm didn’t see it the same way. It seminate information. A grant maker might have gone differently, he thinks, working for regional mortgage lenders if a prominent foundation had been funded research to show the economic willing to step in “to serve as a bro- value contributed by nonprofits that ker to bring two private industry folks run foreclosure prevention programs. together for the betterment of the The mortgage companies had not community.”

24 WORKING WITH THE BUSINESS SECTOR KEEPING A WRITTEN RECORD while we were doing it. It was really only afterward, when we put some A few grant makers who have worked thoughts on paper, that we could say, on projects with businesses recommend ‘Oh, there’s where we got screwed up,’ keeping a running diary or at least or ‘Gee, we actually came a long way some written reflections on the experi- once we got to that point!’ Both the ence. One said: “With all the back-and- good and the bad became a lot clearer forth, the fumbling communications and to us afterward. What we learned from crossed signals, the disappointments going through it methodically is now and the surprises, we really weren’t in information we can put to use the next any position to understand this exercise time we try this.”

WORKING WITH THE BUSINESS SECTOR 25 Key Lessons from Grant Makers

FOR GRANT MAKERS IN PRIVATE AND dent foundation. “You never know COMMUNITY FOUNDATIONS what level of interest you may find among business people until you ■ Be prepared to think differently start poking around.” about how business can advance your philanthropic purposes. The ■ You may need to persuade col- dividing line between nonprofit and leagues in your own organization for-profit work has blurred as the that working with business is a role of government in society has good idea. Linking for-profit and diminished, the role of business has nonprofit interests may strike some become more pervasive, and a small foundation employees as improper, but significant part of the business or legally risky, or even just point- community has begun to accept less. Not all these concerns are greater responsibility for the well- unreasonable, but some of them being of society as a whole. In this may be exaggerated or based on environment, there are ways to poor information. It probably won’t harness market forces to advance be enough simply to explain how a your grant making objectives that partnership with business would did not exist – or did not seem advance your program goals. You proper – just a few years ago. You may also need to explore less explicit may greatly increase your chances forms of resistance — like political for success by challenging your- anxieties, philosophical misgivings, self to explore opportunities in this or distrust of corporate motives. unfamiliar terrain. FOR GRANT MAKERS AND OTHERS IN THE CORPORATE SECTOR ■ Consider various ways in which companies and business organiza- ■ Look for opportunities to link tions can become involved. On the philanthropy with your company’s simplest level, some businesses and goals in ways that benefit both. corporate foundations may be will- There need not be a stone wall ing to make grants (or enlarge their between your charitable aims and current grants) in cooperation with your company’s business. Philan- other funders. There may also be thropy should not be subservient to times when they would like to work the profit-making interests of the on something directly in partner- company, but it can make use of the ship with a foundation or a nonprofit company’s skills, its relationships grantee. They may even want to be with industry and the community, part of a social-change effort that and the particular interests of its seeks to reform the way business is personnel. Philanthropy can benefit done in their industry. “Businesses the company by building a stronger consist of people who are also community, improving relation- citizens, with human interests and ships between the business and its social concerns like everyone else,” neighbors, and offering employees a says a grant maker in an indepen- chance to take a role in civic affairs.

26 WORKING WITH THE BUSINESS SECTOR ■ Try to involve executives and useful first step is just to bring the employees in issues that are mean- two sides together and explore com- ingful to them. To make corporate mon work and interests. philanthropy better understood ■ Anticipate and work with the and more widely supported in the cultural differences between the company, it helps to start with a for-profit and nonprofit sectors. few managers who are personally Businesses and philanthropic organi- interested in a philanthropic issue zations have different cultures, and who might gradually bring oth- different vocabularies and back- ers along. Then work with them to grounds, and different ways of design and execute a project that analyzing problems and organiz- will show how your grant making ing solutions. Those differences can serve both charitable and busi- can sometimes give the impression ness goals. that the two sides have unbridge- ■ Evaluation of results should able philosophical disagreements, include both sets of goals. Even but many observers counsel against with imperfect tools, assessing the leaping to that conclusion. Pragma- outcomes of grants — both their tism and open-mindedness work social benefits and their economic best in dealing with the differences. usefulness to the company — may Grant makers from both sectors be important for maintaining con- recommend being aware of your tinued support. Still, grant makers own cultural biases, acknowledging caution that colleagues should not the legitimacy of the other side, and expect to see measures of “return focusing on common objectives. on investment” in philanthropy ■ Be patient, and take notes. Projects that are as clear-cut as in business. that involve working across the Among other things, philanthropy’s for-profit/nonprofit divide can take achievements can’t always be mea- a long time to achieve success. For sured in dollars earned or units of many nonprofit grantees, learn- input and output. ing to work with business involves developing new skills, changing FOR PEOPLE WORKING IN EITHER established ways of doing things, SECTOR and even learning a new language. ■ The first challenge is to make Because this is still new terrain, and connections and create opportu- the process of working together is nities for discussion. It can take not well understood, it can be help- time, grant makers advise, for trust ful to keep a running diary while and frankness to develop between joint efforts are unfolding, both to nonprofit and for-profit organiza- help the participants reflect on what tions, even when they are interested they’ve done together and to help in similar goals. Sometimes, the most others learn from their experience.

WORKING WITH THE BUSINESS SECTOR 27 Ways to Use This Guide

In addition to helping you think about possible strategies for accomplishing your programmatic goals, a major purpose of this guide is to prompt reflection and conversation about the differences, tensions, and possible points of convergence between for-profit corporate interests and the goals of grant makers. To that end, depending on your objectives and where you sit, you may want to share the entire guide or portions of it with:

■ Colleagues, as a frame for thinking about what value systems you hold – individually and collectively – that shape your relationships across the for-profit/nonprofit divide

■ Grantees, as a prompt for them to consider how well they are prepared to function in dealing with potential or actual corporate-sector partners

■ Trustees, as a basis for talking about how your foundation might participate in the ongoing discussion about the changing role of business in society

You may also want to use some of the ideas and examples presented here to:

■ Bring forward in a cross-sector meeting or training program, when unstated differences in perspectives or values get in the way

■ Provide examples to share with potential partners about the role some companies have been playing in addressing social issues

■ Offer background on the broad context of cross-sector grant making to help frame conversations on strategic philanthropy

28 WORKING WITH THE BUSINESS SECTOR ACKNOWLEDGMENTS

We wish to thank the grant makers and grant users who generously shared their experiences and insights, and all those whose contributions of time, talent, and perspective have helped to make this guide possible.

Douglas Bauer David Logan Business and Society Program Hitachi Foundation Elizabeth Biemann George McCarthy at the Aspen Institute International Youth Foundation Angel Bermudez Mara Manus Bank of America Community Jobs for the Future Sarah Bock Branka Minic Development Bank Manpower, Inc. Beth Buehlmann Helen Neuborne Boston College, Center for Laufer Green Isaac Howard Byck Raymond Offenheiser Corporate Citizenship National Center for Family John Colborn Ariel Pablos-Mendez The Boston Foundation Philanthropy Michael Conroy Mark Rand Brody Weiser Burns New Hampshire Charitable Frank DeGiovanni William Reese Callaway Golf Company Foundation Anne Dowling Caroline Roan Foundation New Prospect Foundation Barbara Dyer Steve Rochlin Carol Glazer Consulting, Inc. Oxfam America Fran Eaton Jerry Rubin Center for Workforce Pfizer Foundation Virginia Esposito Felia Salim Preparation, U.S. Public Theater Lewis Feldstein Judith Samuelson Chamber of Commerce Rockefeller Foundation Jon Funabiki Roberta Shulman The Conference Board Share Our Strength Carol Glazer Suzanne Siskel The Corporate Citizenship Social Venture Partners Denver Lisa Jordan Sean Stanton Company Rockefeller Philanthropy Richard Jung Paul Thompson Council on Foundations Advisors Michele Kahane Augusto Varas Dowling & Associates, Inc. Tifa Foundation Bassma Kodmani David Vidal Ford Foundation Yale School of Forestry and Jessica Laufer Robert Wadsworth Funders Network on Trade and Environmental Studies Rick Luftglass John Weiser Globalization Paul Lehman Gill Foundation

Underwriting for this guide was provided by the Ford Foundation. For additional guides and other materials in the GrantCraft series, see www.grantcraft.org.

WORKING WITH THE BUSINESS SECTOR 29 grantcraft PRACTICAL WISDOM FOR GRANTMAKERS

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