Promoting the greater good can also advance the bottom line
Genesis of a Giving Culture
In 1858, at the age of 12, William G. Howard lost his left arm to a McCormick Reaper. No longer able to farm, he returned to school as the only student to study beyond the eighth grade. Neighbors pooled their money and sent him to Kalamazoo College. After earning the privilege to practice law, William returned home to serve the community of friends who had supported him in his time of need.
After William’s son and grandsons joined the practice, Howard & Howard’s culture of giving continued to evolve. The firm pursued unpopular causes such as the Kalamazoo desegregation case, took pro bono cases and matters by court appointment, encouraged community service, and supported charitable causes.
Like most organizations at the time, our financial contributions followed the “checkbook charity” paradigm. We made contributions on an ad hoc basis to what we believed were worthwhile causes without focusing on accountability, efficiency, outcomes or advancing the business interests of our organization. Like many small and mid-sized companies, we failed to recognize the opportunities offered by a focused program of targeted giving.
As the business of law became more sophisticated and competitive, our giving philosophy evolved into a formal corporate giving program (CGP). In 1986 we established the Howard & Howard Community Reinvestment Fund (H2CRF). The H2CRF is an employee-funded, donor-advised fund, administered by a community foundation. The program maximizes our human capital and financial resources, enhances job satisfaction, aids in employee recruitment and retention, increases brand awareness, and promotes profitability. Since its inception, the H2CRF has distributed nearly $3 million to not-for-profit organizations that are important to our employees, clients, prospects and referral sources in the communities we serve.
CGP Program Structure
Giving programs can take on many forms and be funded in several ways. A well-run United Way campaign always offers a good introduction to the giving community. The most effective campaigns fully utilize the promotional resources of the United Way staff and volunteers to educate employees about the myriad of giving opportunities and the impact each employee can make on the community. A matching grant program consistently increases employee involvement and plays a critical role in maximizing participation.
A formal program to encourage volunteerism also serves a vital role in many CGPs and directly promotes the business interests of an organization. Some organizations loan employees to specific organizations for discreet projects or extended campaigns. Some include more general volunteering obligations as components of job descriptions and performance appraisals. Some compensate employees who volunteer for causes that advance the company’s interests in the form of salary increases, bonuses, gifts and time off work. Some make financial contributions to organizations for which employees volunteer. Most acknowledge employee volunteer contributions through internal communications, newsletters, bulletin boards and websites. All successful organizations recognize that community service fosters the relationships that drive business development and creates leadership development opportunities for employees.
Another giving model is the direct giving program. In this model, the organization funds charitable gifts and takes a direct tax deduction, subject to IRS limitations. Sponsorships and gifts that do not qualify as charitable contributions may nevertheless be deducted as business expenses when computing corporate income tax obligations.
Many large organizations establish a corporate-funded foundation that operates as a distinct entity with an independent board of directors. This model is generally too complex and expensive for small and mid-size companies to administer.
Such organizations, like Howard & Howard, are better served by establishing a donor-advised fund administered by a community foundation or other third party that, for a modest fee, assumes responsibility for satisfying tax and regulatory requirements. A donor-advised fund may be funded by employee contributions, company contributions or a combination of both. Under this model, the company makes recommendations for gifts from the fund to the third-party administrator, who is free to accept or reject each proposal. As a practical matter, assuming the recommendation is to a 501(c)(3) organization, the foundation funds it. The donor-advised fund model has served our philanthropic needs well.
Establishing the Decision-Making Process
Determining who decides what to give, to whom and why is critical to a successful CGP. Some companies charge a single corporate giving officer with responsibility for making the business case to the CEO for recommended gifts. Other companies enlist a committee to make such recommendations. Some, like Howard & Howard, with multiple office locations, establish an allocation committee comprised of senior management and representatives of each location who make recommendations to the committee based on the consensus of the employees at each particular office. In our experience, an effective CGP benefits from a large and diverse allocation committee.
A successful CGP also includes specific themes and rules that govern distributions. This approach focuses giving and maximizes the overall impact of charitable dollars. For example, a company that may be perceived as contributing to environmental problems may adopt a “karmic credit” approach and target “green” projects to offset these perceptions. A company that uses recycled products might focus on projects encouraging recycling. At Howard & Howard, we focus our giving to organizations that benefit children, education and the arts.
The H2CRF rules include the following:
- All donations must be given to a 501(c)(3) authorized agency.
- No donations may be made to solicitations that return monetary value to the firm (i.e., candy, tickets, golf or meals).
- Only employee solicitations will be considered.
- The employee proposing the donation must make a written recommendation that includes his or her connection and involvement with the organization or a client, prospective client or referral source’s connection to the organization; the potential benefit to the firm or the pure philanthropic purpose of the gift; and how the employee intends to follow-up on the efficacy of the gift.
- No donations are given to religious or political institutions or alma maters.
- Gifts must be for present use rather than for endowment or building funds.
- Substantial gifts that “make a difference” are preferred.
Institutionalizing a Corporate Giving Program
Maximum engagement of participants in a well-communicated, transparent CGP is critical to its success. Securing employee engagement starts before the first day on the job. Studies show that the generations following the “baby boomers” place a higher emphasis on working for socially conscious organizations. Include information about your CGP in help-wanted ads, employment applications and job interviews. You will maximize participation by addressing your giving philosophy at the inception of the employment relationship. At Howard & Howard, we encourage our attorneys to donate one percent of their income to the H2CRF and ask our non-attorney colleagues to give what they can. The best opportunity to obtain buy-in to a corporate giving program like the H2CRF is when the applicant is asking for a job. One hundred percent of my colleagues in Peoria participate.
After hiring, include additional information about your CGP in the orientation process. Strongly encourage and incentivize participation. Modify self-evaluation forms and performance appraisals to acknowledge employee contributions, through community service and volunteerism, to the company’s mission, core values and strongly-held beliefs. Utilize all of the company’s communication resources from newsletters, emails, websites and bulletin boards to constantly remind employees about the positive outcomes resulting from their commitment to share.
Increasing Brand Awareness
Small and mid-sized companies spend thousands of dollars annually on advertising to obtain positive name recognition. Many of the same companies spend thousands more on ad-hoc charitable giving. While anonymous giving to the less fortunate represents the purest form of philanthropy, organizations are increasingly taking advantage of increased brand awareness offered by a targeted giving program in their public relations and advertising business plans.
If you establish a foundation or donor-advised fund, include your company’s name in the title. When making grants, include your brand in the title of the gift, i.e., the Howard & Howard Head Start to Art Grant, the Howard & Howard Future Laureates Arts Scholarship, the Howard & Howard International Health Studies Scholarship Fund. Issue press releases in connection with your grants. Include, whenever possible, photographs of grant recipients and their ultimate beneficiaries in your external communications. Consider obtaining a reusable large dry erase check with your company’s name and logo that can be used for promotional photo opportunities. Finally, you should strongly encourage employees to participate in events and receptions sponsored by the organizations that your company supports.
Although William G. Howard’s descendants no longer practice law, his legacy of community service survives. Our firm’s culture has evolved in large part out of the philosophy of giving embodied in the Howard & Howard Community Reinvestment Fund. We share with the community and with each other, with the understanding that in doing so, we prosper, and with our prosperity, we make our communities better places. In turn, we continue the cycle of growth and prosperity. Through this process, we have come to understand that promoting the greater good also advances the bottom line. iBi