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Dr. Linda Ferrell

Strategic Philanthropy

The Role of  Strategic Philanthropy in Marketing Strategy

In the 1980s, strategic philanthropy emerged as a management practice to support social responsibility in organizations in the United States.  AT&T was one of the first organizations to formally use strategic philanthropy in appointing Reynold Levy to head its foundation to provide leadership in this area.  Levy’s ideas changed the linkage between organizational and societal needs by tying AT&T’s foundation activities to business goals and objectives and emphasizing that such activities could advance business interests (Smith 1994).  Other organizations have followed AT&T's leadership in the philanthropic area. General Motors' approach to strategic philanthropy linked stakeholder values and to balance “altruistic giving with strategic donations” (Weld 1998, p.5).  Former Coca-Cola CEO, Roberto Goizueta noted that “By embracing a strategic approach to philanthropy, corporations fulfill their responsibility to their shareholders, and their commitment to the community” (Saporta 1997, p.1). 

For several reasons, large corporations are fundamentally responsible for shaping our understanding of strategic philanthropy in practice.  First, large corporations have developed formal organizational units or structures to manage this discretionary aspect of their social responsibilities. These structures include corporate foundations, employee committees to oversee corporate giving, and staff functions devoted to the effort. Second, large firms often have significant budgets on which to base philanthropic decisions. Since their inceptions, for example, the AT & T Foundation has contributed more than $46 million dollars and the Ford Motor Company Fund has made grants and gifts in excess of $33 million (The Foundation Center 1999). Over $9 billion was contributed to various causes and charities by U.S. firms in 1998, an increase of 9.3 percent over the previous year (American Association of Fund-Raising Counsel 1999). Five companies, including Bank of America, General Motors, Johnson & Johnson, Philip Morris, and General Electric gave a combined $1.8 billion, thus attesting to the large budgets of some U.S. corporations.

Finally, many firms have discovered the performance benefits of philanthropy, including increased customer loyalty, enhanced company reputation, and strengthened employee commitment and productivity (Business for Social Responsibility 1999). Smith (1994) addressed this potential for corporate philanthropy, noting that “...philanthropic and business units have joined forces to develop giving strategies that increase their name recognition among consumers, boost employee productivity, reduce research and development costs, overcome regulatory obstacles, and foster synergy among business units.” In order to reap these benefits, corporations now view philanthropy-related expenses as no different from budget allocations for advertising, human resources, raw materials and other traditional expenditures. Thus, philanthropy is increasingly integrated within the corporate strategic plan (Conference Board 1999).


 

The purpose of this paper is to develop a rationale for the potential role of marketing within the emerging corporate practice in strategic philanthropy. First, strategic philanthropy is defined and integrated with other elements of social responsibility. Second, examples of strategic philanthropy are provided to address companies' ability to address stakeholder interests while managing social obligations and economic expectations. Third, linkages between marketing and strategic philanthropy are examined, along with directions for future research to better understand the emerging role of marketing within the strategic philanthropy framework. 

 

 

 

Strategic Philanthropy Defined


 

            Strategic philanthropy is the synergistic use of organizational core competencies and resources to address key stakeholders= interests and to achieve both organizational and social benefits. Beyond traditional benevolent philanthropy (e.g., percentage of sales donations or flat donations to social causes), strategic philanthropy involves employees (i.e., understanding their needs and core skills), organizational expertise (e.g., equipment, knowledge, and financial resources), and the ability to link employees, customers, suppliers, and societal needs with these key assets.  John Damonti, President of the Bristol-Myers Squibb Foundation reflected, “When you align your contributions with your business focus, you then can draw on the greater wealth of the corporation’s people, information, and resources” (Lindquist 1998). 

In the philanthropic context, the traditional approach is characterized by corporate giving and related activities that are not purposely aligned with the strategic goals and resources of the organization.  For example, employees may be encouraged to volunteer but receive little direction on where to spend their time.  Specific cases of companies supporting community involvement are numerous, such as: 1) Some Xerox employees in Stamford, Connecticut are given from one month to one year off work to pursue social responsibility projects, 2) Employees at the Body Shop in Little Hampton, England must spend one hour per week supporting public service projects, and 3) Tandem Computers in Cupertino, California offers employees paid public service sabbaticals to pursue community service (Nelson 1997).  Or, most contributions may be made to non‑profits for which top management has a personal interest.  For example, Ben & Jerry’s Homemade gives one percent of its pretax profits to programs supporting peace initiatives (Nelson 1997).  In this type of corporate philanthropy, firms have a collection of well‑intentioned practices but there is no true integration throughout operations and strategic decision processes.

In the emerging model, philanthropy becomes one focal point under a corporate vision that includes both firm welfare and benefits to stakeholders. This requires top management support, including a reward and incentive structure that incorporates stakeholder concerns and benefits. Corporate giving, volunteer efforts, and other contributions are considered and designed in tandem with corporate strategy.  The shift from benevolent philanthropy to strategic philanthropy has come about as organizations have struggled in the 1980s and 1990s to redefine their mission, alliances, and scope. 

Downsizing, growing international competition, divestitures, and investor demands have caused many organizations to reassess their business practices and outcomes. As a result, organizations utilizing strategic philanthropy now blend organizational and social needs. Under this approach, neither philanthropy nor business objectives have a dominant role, as both collaborate to benefit and inform the other. Table 1 provides information on the evolution of corporate philanthropy in the United States.


 

 

Philanthropy and Social Responsibility

It is important to place strategic philanthropy in the context of social responsibility, the recognition that business operates with accountabilities beyond the profit-and-loss statement. For example, Carroll's (1979, 1991) classic four-part model of corporate social responsibility includes economic, legal, ethical, and discretionary responsibilities. Most firms understand the need to be economically successful and the importance of complying with laws established within society.  In addition, through the establishment of core values and an ethical culture, most firms are recognizing the many benefits of good ethics.  Evidence is evolving that there is a positive relationship between ethics and employee commitment, customer loyalty, and profits (e.g., Maignan, Ferrell, and Hult 1999).  Normally, ethics enhances the bottom line rather than diminishing it. Ethics can reduce the cost of business transactions, establish trust among stakeholders, improve teamwork, and preserve the social capital necessary for an effective infrastructure for conducting business (Bowie 1998).

A 1998 study by the American Productivity and Quality Center (APQC) indicates the definition of corporate success is slowly transforming to include four equal and complementary goals.  Corporations are seeking to become the 1) supplier and provider of choice, 2) employer of choice, 3) investment of choice, and 4) neighbor of choice. Progressive organizations are investigating ways to tie corporate objectives to social responsibility activities, especially through the development of citizen advisory panels, public hearings, meetings with community service organizations, and participation in community events.  These practices are intended to create "corporate equity with communities and stakeholders" (pg.9), with much of the activity involving corporate donations of time and money. 


 

Philanthropy is located at the most voluntary and discretionary dimension of corporate responsibility and has not always been linked to profits or the ethical culture of the firm.  In fact, the historical approach to philanthropy separated giving to society from business performance and other elements of the firm, including employees, customers, and corporate culture.  Recent studies have begun to show organizations’ formalization of philanthropic activities and their attempt to integrate philanthropic goals with other business strategy and implementation.  A Conference Board Survey of 463 U.S. companies found that those taking a more businesslike approach to philanthropy resulted in a better image, increased employee loyalty, and improved customer ties (Schwartz and Smart 1995).  In sum, organizations are best suited to deal with societal issues in areas with which they have some experience, knowledge or expertise.  From a business point of view, organizations wish to reinforce competency within core areas and develop synergy between business and philanthropic acts.  Thus, strategic philanthropy involves the purposeful alignment of broad organizational resources with social causes and needs.

 

Strategic Philanthropy Versus Cause-Related Marketing

The first attempts by organizations to tie organizational goals to philanthropic giving emerged with cause-related marketing.  Whereas strategic philanthropy seeks to tie overall corporate resources and knowledge to address problems or needs, cause-related marketing usually links an organization’s product(s) directly to a social cause through the firm's marketing plan. Avon, in their “Breast Cancer Awareness Crusade,” generates proceeds from the sale of products featuring the “pink ribbon.”  Donations are made as grants to non-profit and university based programs through its partner the National Alliance of Breast Cancer Organizations.  Avon has raised over $25 million through this program (Avon Corporation 1999).  In a similar alliance,  Regis Hair Salons offered $10.00 haircuts during their “Clip for the Cure” campaign that raised over $200,000 for breast cancer research (Pipp 1996).  Generally, as is the case with Avon and Regis, organizations prefer to support causes that are of interest to their target market.  In a single year, more than $500 million was paid by organizations for the rights to support various social programs, ultimately raising roughly $2.5 billion for these causes (Kadlec and Voorst 1997).

While there is a philanthropic motive to cause-related marketing, these efforts tend to produce relatively short term, product related outcomes.


 

A consumer study on cause-related marketing found that such activities have the potential to affect buying patterns.  A vast majority of consumers (86 percent) felt that given equal price and quality in products, they would be more likely to buy a product associated with a charitable cause. The study also noted that 70 percent of marketing directors felt that cause-related marketing would increase in importance over the coming years (Adkins and Kowalska 1997).  Through cause-related marketing, companies first become aware that supporting social causes such as environmental awareness, health and human services, education and the arts can support business goals (Mullen 1997).  One of the main weaknesses with cause related marketing is that 90 percent of consumers cannot link specific philanthropic efforts with companies (Friedman and Kouns 1997).  Because strategic philanthropy is more pervasive and relates to company attributes and skills, such alliances should have greater consumer recognition.  Table 2 provides a comparison of cause-related marketing and strategic philanthropy.

 

Institutionalization of Corporate Social Responsibility

A number of factors have affected the institutionalization of social responsibility concerns into corporate strategy and decision‑making.  First, federal governments have formalized expectations of organizations' responsibility for ethical compliance.  Second, social and ethical criteria are being used by customers and business partners in evaluating those with whom they conduct business.  Third, corporate governance issues are receiving greater attention.  The following section describes these factors and provides insight on their relationship to strategic philanthropy.

First, the United States Federal Sentencing Guidelines for Organizations, Australian Standard on Compliance Programs, and Canadian Competition Act all provide incentives for organizations to develop, implement, and continuously improve programs to detect and prevent

violations of law.  Effective programs are based on the unique risk areas and corporate values of an individual organization, although there are common program elements across firms, industries, and cultures.  Programs that are effective normally include these elements: 1) code of


 

ethics/conduct,  2) upper management oversight, 3) ongoing training and communications, 4) care in delegating substantial authority, 5) equitable and consistent enforcement of standards and punishment, 6) safe and confidential reporting mechanism, and 7) continuous improvement

processes.

This type of federal legislation creates a favorable climate for self‑regulation, not increased governmental restrictions.  Given the promise and unique opportunity for self‑regulation, many businesses have surpassed these seven requirements by incorporating ethical standards into the compliance initiative.  Organizations and industries are proactively pursuing “ethical compliance” initiatives to demonstrate their commitment to standards that go beyond legal requirements (Thorne LeClair, Ferrell, and Ferrell 1997).  Through this commitment, corporations have heightened expectations of themselves and by extension, expectations of other firms.  Pompa and Petry (1999) report that some organizations are beginning to assess the commitment of the extended organization to ethics and compliance.  A major concern is the effect of vendor and customer interactions on ethical practices and corporate reputation, since many risks exist within business partnerships.  The area of ethical compliance will continue to mature in this manner, with the trend toward finding a strategic relationship between ethics, compliance, and stakeholder relationships.  At a workshop on the future of business ethics, participants discussed the nexus between ethical compliance programs and corporate social responsibility (Ethics Resource Center 1997).  This connection is found when top management is committed to concerns that go beyond financial outcomes, coupled with the integration of stakeholder benefits in organizational strategy.


 

Second, customers and other business partners are considering an organization's ethical and social performance as choice criteria in economic decisions.  A Walker Research survey of 1,037 consumers determined that 47 percent would be more likely to buy from a “good” company if quality, price, and service were equal.  In contrast, 70 percent would not buy from a company that was not socially responsible (Stodder 1998).  The Social Investment Forum estimates that over $1 trillion dollars are invested in mutual funds where investments are screened on social criteria.  The forum also suggests the amount of money in these funds increased by 85 percent during 1996 and 1997 (Business for Social Responsibility 1999).  Common screening criteria include environmental responsibility, human rights practices, community participation, and human resource policies. 

Progressive organizations use social accounting and auditing processes to measure performance on these types of criteria, report it to stakeholders, and develop plans for improvement.  As Zadek, Pruzan and Evans (1997) indicate, social audits can serve as both management (i.e., account and control) and accountability (i.e., report and respond) mechanisms.  At this level of commitment, most organizations have gone through the long process of effectively integrating stakeholder concerns into corporate strategy and decisions.  In 1992, Vancouver City Savings and Credit Union of Canada (VanCity) initiated the process of increasing its social accountability to various stakeholders.  The process started when the organization's executives and Board of Directors recognized that VanCity's level of disclosure, not necessarily its social responsibility, was below many financial institutions in Canada (Brisbois 1997).  By increasing its disclosure and reporting, VanCity improved awareness of its commitment to social responsibility and ultimately refined its corporate strategy to meet other stakeholder concerns.

Third, the area of corporate governance received increasing attention in the late 1990s.  Corporate governance traditionally concerned management’s responsibility to be accountable for the utilization of company assets, with a focus on generating shareholder returns.  Recently, the discussion of corporate governance has broadened to include a stakeholder perspective and disclosure of data not required by law (Organisation for Economic Cooperation and Development 1999).  The transparency movement involves the disclosure of non‑financial information including environmental impact, affirmative action, vendor and customer relations, union relations, role of board of directors, and existence of ethics and compliance programs.  In relation to corporate governance, investors are also beginning to use shareholder resolutions to increase corporate disclosure and change policies and practices relative to social responsibility (Business for Social Responsibility 1999).  For example, the California Public Employees Retirement System challenged all 300 companies in its portfolio to reexamine corporate governance procedures, including the quality, organization, and composition of their board of directors (Organisation for Economic Cooperation and Development 1999).

Although these factors may not have immediate import to volunteerism and corporate contributions, they suggest a general trend toward greater corporate accountability for social responsibility concerns.  Ethical compliance, choice criteria, and corporate governance are related to strategic philanthropy through the organization's increasing focus on its role as a responsive and responsible member of society.  These factors also point to the increasing power that various stakeholders have in making organizations accountable for their policies and practices.  In the following section, we provide insights on philanthropic collaborations designed to strategically align organizational resources and competencies with social issues or causes.

 

Strategic Philanthropy and Marketing Strategy

            A strong market orientation is the result of the following: continuous market intelligence and its integration in organizational strategic planning, cross-functional efforts to address customer needs, quick response to changing external factors, and a longer term perspective in strategic planning (Kohli and Jaworski 1990, Narver and Slater 1990, Slater and Narver 1994).  Companies with strong market orientations have increased profitability and higher growth rates.  A strategic, external orientation with sensitivity to changing customer needs is key to developing a strong market orientation and to the implementation of a well designed strategic philanthropy program.  Strategic philanthropy initiatives inherently operate with a longer term perspective toward the strategic planning process.  Investing in strategic philanthropy will not necessarily generate short term returns on the organizations investment.  Unlike cause-related marketing which has immediate ramifications for sales and profitability, strategic philanthropy is a longer term investment, often without short term, bottom line benefits. 

            Although some business firms are moving towards the strategic philanthropy model, other organizations are still considering the needs of individual stakeholders.  In the following sections, we provide examples of corporate implementation of strategic philanthropy  programs which are often integrated with marketing goals and objectives.  These examples are organized around stakeholders, including employees, customers, business partners, and the community and society.  Such activities serve as examples of best practices in implementing and managing strategic philanthropy initiatives.  Arnold Hiatt, former CEO of Stride Rite Corporation noted, “Look at a well run company and you will see the needs of its stakeholders, its employees, and the community at large being served simultaneously” (Nelson, p. 204).

 

Employees

In 1996, United Airlines Foundation adopted four focus areas for its philanthropic strategy.  One of the focus areas is education and careers, with a global emphasis. Using the professional expertise of United Airlines employees, the foundation helped develop the Virtual Trade Mission collaboration between the U.S. federal government, labor groups and private companies.  This educational program was designed to teach high school and middle school students the importance of America's export economy.  The Virtual Trade Mission utilized multimedia technology to simulate a trade mission and has been implemented in more than 30

communities around the world.  United Airlines employees contributed expertise on world geography, global economic conditions, and cross‑cultural communication (Otterbourg 1999).   These elements were not only effective for student learning, but mirror the skills and knowledge

needed for the airline to operate effectively on a daily basis.  United Airlines’ core competencies include the ability to transfer knowledge and best practices between countries in which it operates.


 

3M is concerned about taking care of employee needs while balancing the interests of other stakeholders.  3M has been very aggressive in implementing environmentally friendly processes and procedures in it manufacturing processes.  The company provides van transportation for its employees to work within a 15 mile radius of the office.  If the van has only a few riders, each pays a minimal monthly fee to help offset some of the costs of the program.  If the number using the program increase to a specified level, the monthly fee is dropped.  3M has found that employees participating in the van transport program are less likely to use sick leave and more likely to manage their time well while at work.  In addition, pollution levels are minimized because of the van pooling initiative (Reder 1995).

 

Customers


 

            As marketing practice and thought move from a focus on customer satisfaction to customer loyalty (Oliver 1999), strategic philanthropy becomes increasingly more important.   Customer loyalty and trust go hand in hand.  Cone/Roper's "Cause-Related Trends Report: Evolution of Cause Branding" reveals that 8 in 10 Americans are more favorable towards a company supporting a cause in which they have an interest.  In addition, roughly 2/3 of those surveyed said they felt greater trust towards companies associated with social causes (PR Newswire, 2000). Other studies have demonstrated positive benefits of its of corporate citizenship, including higher customer satisfaction, stronger employee commitment, reduced regulatory and legal interventions, increased productivity and quality, and profitability (i.e., Business for Social Responsibility 1999, Maignan, 1997)  Strategic philanthropy efforts systematically attempt to consider customer and other relevant stakeholder interests and concerns in developing alliances and providing resources.  In the face of increasing competition, finding ways to enhance trust and consumer acceptability could relate directly to competitive advantage and customer loyalty. 

Home Depot has been progressive in its approach to philanthropy.  The company has skillfully aligned its expertise and material provision ability to addressing social needs.  Home Depot's relationship with Habitat for the Humanities allows the company to provide a service in an area where they have enormous expertise and ability.  This alliance gives their employees a chance to improve their skills and bring direct knowledge back into the workplace to benefit customers.  It also enhances Home Depot’s image of expertise as the “do it yourself” center.  Home Depot also responded to customers’ needs when Hurricane Andrew hit the Miami area.  There were many home building supply and hardware stores taking advantage of customers by inflating prices on emergency materials.  Home Depot opened their stores 24 hours each day and made materials available at reduced costs to assist customers in surviving the disaster.

GTE, through its foundation, distributed more than $30 million nationwide in 1999.  Literacy and technology education are two of GTE’s greatest concerns.  GTE’s Family Literacy program funds 44 technology learning centers nationwide.  With an estimated 40 million U.S. citizens classified as illiterate, GTE feels they can influence the quality of life of customers with such a broad based initiative.  Other education programs include Growth Initiatives for Teachers, $12,000 grants for innovation in the classroom with math and science projects and support for the United Negro College Fund (Cohen-Hager 1999).

Business Partners


 

Investors are using philanthropic goals and social concerns when choosing business partners.  The Freeplay Group, based in South Africa, is an example of a company founded on the principle of  “making money and making a difference” (Dahle 1999).  The company manufactures and markets self‑powered radios (i.e., wind up) that were originally intended for poor nations where electricity and batteries are scarce.  For example, these radios are used to transmit elementary school lessons in South Africa and election results in Ghana.  The radios now sell in many countries at retailers such as the Sharper Image, RadioShack, and Harrods. Freeplay's investors include the General Electric Pension Trust and Liberty Life, a South African insurance firm. Rotary International and other community organizations are using the radios to implement programs that benefit society and communities.  These investors and customers have chosen Freeplay for its solid business plan founded on broader social goals.

BJC Health System is working with other area health systems to make health insurance available to St. Louis area residents who cannot afford it.  BJC manages Care Partners and ConnectCare.  Care Partners offers 24 hour emergency care facilities and primary care facilities to anyone in need--whether insured or not.  ConnectCare was launched by city officials and community leaders with the same goal of providing health services to all citizens.  BJC has won praise for its ability to work with insurers, other systems, and the public in supporting health insurance initiatives with the collective goal of improving people’s lives (Babwin 1998).

 

 

 

Community and Society

Coca‑Cola takes a strategic view of its role in society by linking company resources and operating practices to stakeholder issues.  For example, while acknowledging the myriad of problems in today's world, Coca-Cola has chosen to focus its energies and resources on environmental issues where the company has an impact and relevant expertise.  For this global beverage manufacturing and marketing firm, water quality, water conservation, and waste reduction are key considerations in its packaging and operational decisions (The Coca‑Cola

Company 1999).  Coca‑Cola has provided funds and expertise around the world to support collaborations that respond to these environmental concerns.  These projects involve bottlers, employees, suppliers, regulators, customers, and other corporations interested in building

strategies for environmental excellence.

Merck developed a drug to combat “river blindness,” a blinding disease affecting over 18 million people worldwide.  Merck’s expertise as a pharmaceutical laboratory allowed them to develop the drug and their humanitarian orientation caused them to donate Invermectin to over 23 million people.  A Merck scientist who worked on the project noted, “I’ve received more mail based on this decision than anything else we’ve done as a company.  Not only was it positive, more important than our shareholders, I thought, was the effect on the people at Merck,...about what a fantastic move this was for the company” (Reder, p 183).  The benefits of the decision to develop the drug, predominantly for countries which could not afford it, then donate the medication to heavily afflicted areas represents Merck’s understanding of strategic philanthropy and the positive effects upon society, first and foremost, employees, investors, and even customers.


 

In line with their core competence, PrimeCo Personal Communications, provider of digital wireless service, recently donated countless air time and more than $30,000 worth of digital wireless phones to Big Brothers Big Sisters (BBBS).  When PrimeCo customers pledge an hour of time to a volunteer effort in their community, the company donates an additional hour of free time to BBBS.  The program is expected to donate two million minutes or up to two years of service for BBBS (PrimeCo Personal Communications 1999).  LensCrafters has pledged to give one million pairs of glasses to the needy by 2003.  Not wanting their motives questioned, CEO, Dave Brown has given employees directives not to seek publicity.  He states, “ I do not want anyone thinking the company is doing this for any reason other than it’s the right thing to do” (Jones 1997).  Brown also noted that employees could engage in other philanthropy, but this makes more sense in that it leverages their eye care provision skills (Jones 1997).

Finally, industry associations are also working to extend the philanthropic efforts of their member companies. The American Apparel Manufacturers Association assists manufacturers in donating surplus apparel to the needy, homeless, and disaster victims.  More than $54 million of surplus has been donated to over 250 charitable organizations in 16 countries (American Society of Association Executives 1999).   Table 3 provides additional examples of strategic philanthropy programs supporting societal issues.

 

           

Implementation of Strategic Philanthropy

            As these examples demonstrate, there are a variety of approaches for aligning corporate goals with social concerns. Notwithstanding the importance of marketing planning within the cause-related marketing framework, neither marketing practice nor marketing thought have been thoroughly integrated with respect to strategic philanthropy.  Some organizations and leaders see beyond economic concerns, other firms are much less progressive and collaborative in nature.  So to the extent that corporate leaders and others advocate for strategic philanthropy, evaluation protocol must incorporate not only programmatic success but the contribution of philanthropic activity to organizational performance. Several evaluation considerations are offered below.

First, evaluating corporate philanthropy must begin with a clear understanding of how these efforts are linked to the company's vision, mission, resources and strategies.  As our definition suggests, philanthropy can only be "strategic" if it is fully aligned with the values, core

competencies, and long‑term plans of an organization.  Thus, the development of philanthropic programs should be part of the strategic marketing planning process, relate to market orientation commitments and attempt to draw greater linkages with customers interests and loyalty.


 

Second, assuming that key stakeholders have been identified, organizations will need to conduct research to understand stakeholder expectations and their willingness to collaborate for mutual benefit.  Although many companies have invested time and resources to understand

the needs of employees, customers and investors, fewer have examined other stakeholders or the potential for aligning stakeholders and company resources for philanthropic reasons.  The role of trust in fostering competitive advantage is not fully understood or leveraged in most organizations.   Philanthropic efforts should be evaluated for their effects on and benefits to various groups.

Third, evaluation protocol should include an assessment of how philanthropic and corporate citizenship initiatives are communicated to stakeholders.  As the VanCity example suggested, the reporting mechanism not only improves stakeholder knowledge but leads to improvements and refinements.  Although critics may deride organizations for communicating

their philanthropic efforts, the strategic philanthropy model is dependent on feedback and learning to create greater value for the organization and its stakeholders.  If organizations are clearly making good strategic business decisions in their strategic philanthropy alignments this should be promoted and communicated to relevant stakeholders.

Finally, strategic philanthropy is based on organizational learning, which includes corporate history, collective vision, and other processes for thinking, doing, evaluating, and reflecting (Senge 1990).  Just like the organizational learning paradigm, strategic philanthropy depends on the systemic interplay between corporate principles (i.e., guiding ideas and values) and practices (i.e., what is done).

 

                                                    Conclusions and Future Research


 

While organizations have casually realized the benefits of philanthropy in supporting employees, the community, and often stockholders, the concept of strategic philanthropy suggests that organizations use their core competencies and resources to benefit stakeholders in a planned manner.   From this perspective, strategic philanthropy is an integrated part of a broader philosophy that recognizes how participation in corporate citizenship can help an organization improve its overall performance.

Cause-related marketing opened the door to link philanthropic goals to other business objectives and stakeholder interests.  By linking products with charities and social causes, organizations acknowledged the opportunity to align philanthropy to economic goals, and to acknowledge stakeholders interests in organizational benevolence.  A social responsibility approach to managing the organization has been the result of many influences including the federal government’s formalized expectations for legal compliance, social and ethical criteria emerging as evaluative tools for customers and business partners, and the increased influence of corporate governance issues.

            Many organizations have skillfully used their resources and core competencies to address the needs of employees, customers, business partners, as well as the community and society.  In turn, these actions have been found to positively influence financial performance.  To successfully integrate strategic philanthropy into the organization, the efforts must first fit with the company’s mission, values, and resources.  Organizations must also understand stakeholder expectations and propensity to support such activities for mutual benefit.  Such a process is self-renewing and relies on the feedback of stakeholders in improving and learning how to better integrate the strategic philanthropy objectives with other organizational goals.


 

Research is needed to assist in understanding how strategic philanthropy can be developed and integrated to support an organization’s core competencies.  Like the examples presented here, the collection of descriptive information about strategic philanthropy programs and benefits can enhance a firm’s ability to engage in successful involvement.  Organizations that have successful strategic philanthropy programs need to survey employees and other key stakeholders to determine their knowledge and attitudes toward the firm’s strategic philanthropy efforts.  A determination of the firm’s strategic advantage should be assessed.

Research is needed to determine how organizations develop a fit between core competencies and strategic philanthropy.  Best practices that have resulted in strategic integration in overall corporate citizenship and business performance need to be analyzed to determine normative managerial practices. This type of research should examine different industries and corporate cultures to explore how the strategic philanthropy component of corporate citizenship can be a driving force in the success of the business.  Finally, more evidence needs to be provided that determines the relationship between strategic philanthropy and various variables that influence organizational success.  Variables such as employee commitment, customer loyalty, investor attitudes and commitment, and reputation could assist in assessing the success of strategic philanthropy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Table 1

                                 Evolution of Corporate Philanthropy in the United States

______________________________________________________________________________

 

Time Frame                             General Characteristics of Philanthropy

______________________________________________________________________________

Through 1950s              Federal law prohibits corporate donations

 

1960s and 1970s                        Public begins to believe companies should donate some of their profits to societal causes

 

Large corporations set up foundations

 

Few criteria for choosing philanthropic projects

 

1970s and 1980s                        Stagnant economy slows corporate philanthropy

 

Public and government lower expectations of business

 

Merger and acquisition strategies leave little room for philanthropic

effort and donations

 

Early 1990s                               Pressure to formalize corporate governance and accountability

 

Public reacts to "greed" of 1980s by raising expectations of business

 

Companies take more active role in community and societal causes

 

Mid 1990s and Beyond  Expansion of philanthropy model to include time and human resources

 

Recognition of relationship between philanthropy and corporate benefits with customers, employees, business partners, and community

 

Collaboration between business and other groups to resolve social

problems

 

Focus on aligning business goals to philanthropic activity through

overall corporate vision

______________________________________________________________________________

Sources: Smith (1994), Svendsen (1998)

 


 

                                                                        Table 2

                           Strategic Philanthropy Contrasted with Cause-Related Marketing

______________________________________________________________________________

 

Strategic Philanthropy                         Cause-Related Marketing

______________________________________________________________________________

 

Focus:                          Organizational                                                   Product (Product Line)

 

Goals:                          Improve organizational competency                     Increase product sales

                                    or tie organizational competency to

                                    social need or charitable cause

 

Time Frame:                Ongoing                                                            Traditionally of limited

duration

 

Organizational

Members Involved:      Potentially all organizational employees    Marketing department and related personnel

 

Cost:                            Moderate-requires alignment with                        Minimal-alliance development

organizational strategies and mission                    and promotion

 

______________________________________________________________________________

 

 

 

 

 

 


 

 

 

 

 

 

 


 

Table 3

Corporate Strategic Philanthropy Programs

 

______________________________________________________________________________

 

Organization (Core Business/Expertise)                       Social Cause Supported

______________________________________________________________________________

 

Kraft (Food)                                                                  Feed the hungry initiatives

 

Nation's Bank (Financial Services)                                  Economic development and revitalization of            

                                                                                    Charlotte, NC downtown

 

LensCrafters (Vision Care)                                             Donation of eyeglasses to low income families

 

Bell Atlantic Mobile (Wireless Phone Service)      Donated mobile phones and service to victims of domestic violence

 

Microsoft (Software and E-Business Support)      Assistance in educating the disadvantaged for information technology jobs

 

ADT (Security Systems)                                    Donated personal security systems to battered women

 

Barnes & Noble (Bookstore)                                          Literacy initiatives

 

______________________________________________________________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography

 

Adkins, Sue and Kowalska, Nina. “Consumers Put ‘Causes’ on the Shopping List,” M2 PressWire, November 17, 1997.

 

American Association of Fund-Raising Counsel (1999), Giving USA. AAFRC Trust for Philanthropy. New York.

 

American Association of Association Executives, “How Associations Advance America,” http://www.asaenet.org/AAA/ (1999).

 

American Productivity and Quality Center, Community Relations: Unleashing the Power of Corporate Citizenship (Houston: APQC, 1998).

 

Avon Corporation, “Avon’s Breast Cancer Awareness Crusade,” http://www.avoncrusade.com/

(1999).

 

Babwin , Dan. “Gateway to Good Health,” Hospital and Health Networks, Vol. 72, #22, (November 20, 1998) 20.

 

Bowie, Norm. “Companies Are Discovering the Value of Ethics,” USA Today Magazine, 126 (January 1, 1998).

 

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The Role of  Strategic Philanthropy in Marketing Strategy

 

 

 

 

 

 

 

                                                           Debbie Thorne LeClair*

Assistant Professor of Marketing

                                                         Mississippi State University

College of Business and Industry

Department of Marketing

Mississippi State, MS  39762

 

 

 

                                                                    Linda Ferrell

                                                     Assistant Professor of Marketing

                                                     University of Northern Colorado

Monfort College of Business

                                                               Greeley, CO 80639

                                                                   (970) 351-2810

Linda.Ferrell@unco.edu

 

 

 

 

 

 

 

 

 

Submitted to the European Journal of Marketing, January, 2000.

*Contact person.


 

The Role of  Strategic Philanthropy in Marketing Strategy

 

 Abstract

 

Organizations have long realized the benefits of benevolent philanthropy in supporting community, employees, and the interests of investors.  It has only been in recent years that organizations have formalized and integrated the philanthropic decisions with corporate citizenship and other key strategic organizational performance related decisions.  Organizations in the 21st century are increasingly concerned about managing societal issues in marketing to benefit key stakeholder interests.  This paper develops a new definition of strategic philanthropy and contrasts this with previous conceptualizations.  The purpose of this paper is to outline the concept of strategic philanthropy, assess its development and evolution, give examples of the stakeholder focus and discuss marketing issues, and address elements to consider in implementation.  Finally, the paper provides suggestions for future research and the role of strategic philanthropy in corporate citizenship are provided.