12/12/2013 | Rob Carey

Often, when one thinks of corporate philanthropy initiatives, the vision comes to mind of a firm's CEO and a charity organization's CEO standing behind a giant cardboard check, smiling and shaking hands. Unfortunately, this vision actually serves to hold back the full potential of corporate philanthropy - specifically, the possibilities of this practice to benefit not just the receiving entity, but also to benefit the donor company in the business objective of becoming more profitable through lower costs and higher revenues.

Quite simply, monetary donations spread among various charities or institutions in the name of "corporate social responsibility" are one-time infusions for recipients and most likely offer no benefit at all to the donor company. What's more, even the more thoughtfully considered and more strongly focused practice known as "cause-related marketing" - where a company latches on to a single cause or admired organization - rarely delivers any notable return for the donor company. "You won't get much earned media in return for simply doing the United Way, Habitat for Humanity, or similar types of initiatives because a lot of companies now do that," says Melanie Ulle, founder and CEO of Philanthropy Expert LLC, a strategic-planning firm dealing in family and business philanthropy. "Corporations won't be widely recognized for what has become typical giving. And if a firm has to promote its philanthropy through its own efforts, that generally brings very little business benefit - and risks looking self-serving."

While all this would be of concern to a Fortune 500 company, it is of even greater concern to middle market firms that have little room for financial error in their philanthropic acts. As a result, middle market firms should consider starting from the inside out when building a philanthropic plan.

For instance, many employees under age 30 "want to be mission-driven in the workplace and feel as if they are contributing to the common good," Ulle notes. "The younger generation would rather volunteer than donate money to a cause, and if they get those opportunities from their company, they would actually forgo some compensation to be in an environment they perceive to be mission driven." She adds that employees who are satisfied in this way also tend to stay with a company longer. Both of these factors enhance the firm's bottom line through cost savings.

The most critical aspect, however, for deriving maximum benefit from employee-involved philanthropy is aligning the strengths of the firm with the needs of a community - also known as "corporate context." An example: Starting in the early 1990s when it was an upper middle market firm, Cisco Systems partnered with elementary schools in cities where the firm had offices in order to mentor students and collaborate with teachers to accomplish long-term success in STEM (science, technology, engineering, and math) education. A few years later, the effort was expanded by also providing fully networked computer labs to schools. And as the Internet blossomed in the late 1990s, the firm developed another program that leveraged employees' skills and knowledge to help non-profit organizations use the Internet to their advantage.

Today, the scope of Cisco's philanthropy is far wider and deeper. But this early engagement of employees in delivering concrete benefit to society built lasting momentum for the firm both among its personnel and among the recipients - the latter being future workforce participants who might seek employment from or purchase from Cisco. So by designing philanthropic endeavors with the proper corporate context, a company also serves itself - it builds a present and future supply of labor that's both equipped and motivated to be of value to the organization in the future.

A fine summation was put forth in a paper published a decade ago in Harvard Business Review addressing best practices in corporate philanthropy: "True strategic giving addresses important social and economic goals simultaneously, targeting areas of competitive context where both the company and society benefit because the firm brings unique assets and experience" to the charitable cause. And when employees see their expertise leveraged benevolently by their employer, turnover becomes a fading issue within a company.

On the other hand, there are times when a middle market firm stands to benefit its top line by simply writing a check. "An organization needs a mix of tactics in its philanthropy plan, including a pool of money that should be considered as a cost of doing business," Ulle says. The ability to support the charitable interests of not only your best clients, but also those clients with the most potential upside for the firm, is critical. "If your salespeople have good relationships with particular clients, they can ask about the philanthropic endeavors of those clients and offer to contribute to them," Ulle adds. This is a legitimate use of company dollars designated for revenue growth, for which ROI can be calculated.

And when it comes to offering an employee's or executive's time for working on the board of a charity or nonprofit entity, Ulle too often sees that "middle market firms are aiming a little too low. They look towards the community centers, the little league, or the Boy Scouts and Girl Scouts, when they should probably be focused more on the museums or the children's hospital where they have a business presence. Those other organizations are noble, of course, but that's not where you have the best chance to meet the game-changers who could bring you revenue growth."

Lastly, firms in the middle market face the quandary of who should take on the strategic and tactical duties associated with corporate philanthropy. If a firm does not have the financial flexibility to hire a community-relations or public-affairs director, then a part-time consultant specializing in corporate philanthropy is one possibility. Many middle market firms choose to place the duties on marketing-communications employees or human resources, but there are training, efficiency, and measurement challenges associated with these options. If a firm has a strong culture of consensus-building, then a committee representing different areas of the organization is a possibility - but clear objectives, procedures, and measurements must be part of such a setup if it is to succeed.

To sum up, here are some key considerations for building a corporate philanthropy strategy 

  1. Align the strengths of the firm with the needs of a community - create the correct "corporate context." Then act to deliver lasting community benefit through your firm's skill sets and expertise.
  2. Engage employees by explaining the benefits the community reaps from the "corporate context" approach. This will resonate strongly with younger employees in particular who would rather donate time than money and who tend to stay longer at firms they consider "mission-driven." 
  3. Straight monetary donations should also be part of the mix. Supporting the charitable interests of your best clients and those clients with large potential upside will deliver the best ROI for the donating firm.
  4. Aim high when offering an employee's or executive's time to the board of a nonprofit entity. Approach those institutions where you have the best chance of making connections with influential people who could become "game changers" for your business.
  5. Properly assign the strategic and tactical duties to a community-relations or public-affairs director, or perhaps a part-time consultant with experience. A committee representing different departments is possible - if it receives clear objectives, procedures, and measurement criteria. 

No matter how it is implemented, corporate philanthropy is a must for middle market firms. Ulle warns that "if you avoid this task, you will fall behind versus your competitors in terms of making the right relationships at the right times and in getting more earned media. Right now, a good number of middle market companies are hunkering down, trying to empire-build. But in this area, they're not seeing the forest through the trees."

Rob Carey is an NCMM contributor and a features writer who has focused on the business-to-business niche since 1992. He spent his first 15 years at Nielsen Business Media, rising from editorial intern to editorial director. Since then, Rob has been the principal of New York-based Meetings & Hospitality Insight, working with large hospitality brands in addition to various media outlets. Circle him on Google+.