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Corporations take a strategic approach to philanthropy

If time is money, as entrepreneurs like to say, how are corporate executives to know whether monetary donations or employee volunteerism is the best approach to philanthropy?

Randi Pupkin is executive director of Art with a Heart, which works with disadvantaged populations in Baltimore. Pupkin’s nonprofit is among those that compete for increasingly scarce corporate donations. Since the recession, businesses have turned toward investing in larger, better-known charities.

For many businesses, that question has become more pressing since the recession. When companies found themselves with fewer dollars to spare but more organizations in need of resources, they learned to be more strategic with their community involvement. They’ve become more selective about the organizations they work with and are encouraging employees to be more engaged, said several nonprofit and business professionals.

“The recession presented a challenge to companies, which was retaining the good people and improving employee morale,” said Kelly Hodge-Williams, executive director of Business Volunteers Unlimited Maryland, which organizes employee volunteer opportunities. “All of a sudden, managing expenses became much more important. So just thinking about the costs of recruiting and employee turnover … how do you support and keep good people while also figuring out how to invest in the community? It just sort of aligned; it became an employee morale thing, but it was also a more strategic way of supporting the community.”

Nationwide, corporate donations plummeted in 2009, along with philanthropy from other sources, experts said, citing multiple industry statistics. According to data collected from some of the largest corporate donors by the Chronicle of Philanthropy, an organization that tracks giving patterns, companies’ cash giving fell 7.5 percent in 2009 (to $4.3 billion) from the previous year.

Major organizations in this state also reported losses: United Way of Central Maryland struggled with lagging donations for years during the brunt of the recession, although they’ve been ticking back up, said President and CEO Mark Furst.

But corporate community involvement wasn’t dead, just different. Hodge-Williams said BVU saw a massive spike in companies wanting to contribute employee volunteer hours in lieu of dollars. Furst agreed that corporate interest in volunteerism surged post-recession and remains on the rise.

“In this day and age, time is almost more precious than money,” Furst said. “… I’m very pleasantly surprised by how many companies are encouraging their employees to volunteer, even offering up [paid] time for them to do it. They’re basically underwriting the volunteer work, as opposed to asking employees to do it on their own. We’re seeing more and more of that.”

Companies are also turning to skill-based volunteering — think of an accounting firm doing an organization’s taxes pro bono. Each year since 2009, in-kind donations have increased over the previous year, Hodge-Williams said. The arrangement is appealing to employees, who get to practice their skills in a new environment, as well as the organization, which receives qualified help with tricky or costly tasks.

Many companies, such as Owings Mills-based CareFirst Inc. — one of the largest health care providers in Maryland and a top corporate giver with $57 million in donations last year — are also matching monetary donations made by employees. Others are donating to an organization where employees volunteer.

CareFirst is a nonprofit, although it functions similar to a business. Maria Harris Tildon, senior vice president of public policy and community affairs, said matching donations are an effective incentive for employees. They’ve also “really stepped up” volunteerism, she said, with about 2,000 workers logging 5,800 hours last year.

Strategic giving

In the quest to stretch their dollars, many executives are also narrowing their philanthropic focus, whittling down the list of organizations or issues their companies support. They’re writing larger checks, but far fewer of them.

From 2009 to 2010, 33 percent of U.S. companies devoted more than half of their giving to one area — health care and education topped the list — compared to 23 percent during the previous year, Hodge-Williams said. Their rationale, she said, is that even if they donate less total money, their gift could fund an entire project rather than contribute to several small ones.

But being strategic has its consequences. When corporations sever ties, it’s usually the smaller, lesser-known organizations that get the boot, even though those often need money the most.

Just ask Brenda Boyd, executive director of TuTTie’s Place, a group foster home in Baltimore serving about 75 adolescent boys. The shelter doesn’t receive much support from the corporate community, Boyd said, and she’s getting tired of asking.

“It’s been very challenging,” she said. “When you’re talking about corporations, I think they want to be associated with bigger-name nonprofits. If you look at corporations’ websites for who they support, which I do before I reach out to them, you’re not going to see the little guys. You’re going to see the big organizations pretty much everybody knows.”

Several people said that tendency is due to the results-driven business mindset and the assumption that larger organizations can deliver more reliable outcomes.

“Because dollars are tight, we have noticed an increase in their need [to know the returns on investment] on the money that’s given,” said Kim Fabian, senior vice president of Junior Achievement of Central Maryland, which provides finance and economic education to youth. “We really need to show that our programs are doing what they’re supposed to be doing so our partners know their money is being put to good use, and also so they get recognition for their work with us.”

The culture of corporate philanthropy has been shifting for about a decade, several people said, but the recession accelerated that evolution and emphasized existing business characteristics, like the pursuit of outcomes.

“We had already seen a trend toward companies being more thoughtful and strategic in how they engaged in the community,” Hodge-Williams said. “It was just good business. They were thinking, ‘If we’re going to spend money, we want to make sure we get some kind of return.’ We are seeing companies wanting to do good because it’s the right thing to do, but they’re businesses. They want to get something back.”

Hodge-Williams said corporations will likely continue these more holistic giving practices.

“I think now that we’re in this new trend, it’ll continue to evolve, but I don’t think we’ll go back,” she said. “Companies are realizing that the giving of dollars is not the only way you contribute to the community.”

Comeback?

As the economy recovers, monetary contributions are creeping back up from the low point in 2009. Corporations nationwide gave $14.55 billion (including in-kind donations) in 2011, according to Giving USA, a report by the American Association of Fundraising Council, but Hodge-Williams cautioned against focusing too much on the numbers.

Quantifying corporate giving isn’t an exact science, particularly as volunteerism and pro bono work become more prevalent, because many other reports include the value of non-cash donations.

The Chronicle of Philanthropy found that for 115 large companies providing two years’ worth of data, donations in 2011 were 4 percent higher than in 2010. But those firms’ overall giving, including cash and in-kind donations, rose almost 15 percent.

“So, I think the 2011 numbers are sort of misrepresentative,” Hodge-Williams said. “… Some people were saying, ‘Oh, it’s improving,’ but nonprofits weren’t experiencing it. Product donations are great, but, you know, they need cash.”

Numbers for 2012 are still being calculated, but Hodge-Williams said she expects they will be flat, based on anecdotal evidence from the 50 or so Maryland businesses working with BVU. She doesn’t expect an increase in 2013, either.

And with continued gridlock in Washington over the federal budget, Hodge-Williams said, “nonprofits are going to need a lot more help.”

That environment isn’t a death sentence for nonprofits, but it means businesses aren’t the only ones that need to strategize.

Joyce Duffy, executive director of Harford Family House, which serves the homeless, said because of the recession, the organization revamped events to better fit corporate interests. Its leaders created group volunteer days and geared events toward group participants, she said — and it worked. Duffy said in recent years, Harford Family House has tallied more corporate volunteer hours from more local businesses and received more in-kind donations.

“It’s all because of our very specific marketing strategy,” she said, adding that straight cash donations did not increase. “Now, we don’t just get money for no reason. Now it’s usually a sponsorship, so the advertising is part of why companies do it. And when they participate, they think of it as a team-building activity.”

The story is similar at Art with a Heart, which works with disadvantaged populations in Baltimore. Executive Director Randi Pupkin said the organization worked with corporations more frequently over the past few years, primarily through volunteerism, than any other time in its 13-year history.

“We’ve made a direct effort to have local corporations get involved in doing community or public art projects with us,” Pupkin said. “And then you make connections with the people who come and work on these projects. Our efforts have been very directed and strategic. … In a recession you have to think of creative ways of raising money. It’s about creating more opportunities for more people to know about you. It’s all about relationships, which will hopefully translate into support.”