Beyond Warm Fuzzies

Calculating the ROI of corporate giving.

by Pam Ostermiller

For many people, giving for the sake of giving is the ultimate — and obvious — payoff of charity, especially when one can see the direct results of a monetary gift, fundraising project or afternoon of volunteer work. But when times are tough, when all hands are outstretched and resources are limited, business leaders may need to be choosier, and be able to measure giving on a different scale, to prove to board members that efforts are “worth it.” (Corporations donated $14.5 billion last year, which was down 4.5 percent, according to Giving USA.) While the tax benefits of philanthropy are calculable, how does one determine additional benefits a company may reap? Is there an ROI for charity?

If you ask Deborah Bayle, president and CEO of United Way of Salt Lake, how to calculate the ROI of corporate giving, she chortles, “It’s not easy!” Not only are results hard to measure, she says, but they can take years to become measurable, to be fruitful in any kind of definable way.

“The only way to calculate ROI immediately is if an organization or an individual gave to basic needs,” Bayle explains. “If you give money to the food bank, you can see a return right away, but it only helps a person for one day. This is important, because a person can’t solve bigger problems without having their basic needs met. However, if you give $10,000 to Big Brothers Big Sisters, you won’t see ROI for 10 years, but those are the types of investments that really count.”

Hence ROI, in terms of actual results and in the face of time, is difficult to calculate. But will your company’s charitable “investments” pay off? Charles Moore, executive director of the Committee Encouraging Corporate Philanthropy, told Forbes.com, “As the expectations for corporations continue to rise, CEOs now perceive corporate philanthropy and broader social responsibility decisions as opportunities for investment in business viability, rather than a corporate weakness or risk.”

It may be easier to look at giving as an investment in your employees, your community, and your world and how these entities are an extension of the company. Then, determine the best way to give to have the greatest impact.

Start within

“I had someone tell me that wealth in this life is an asset, but in the next life, it’s a liability,” says Marc Modersitzki, director of marketing for US Synthetic Corporation, where investments begin with generous benefits programs, education programs and profit sharing for employees. Modersitzki says this work environment, coupled with the philanthropic leadership of CEO Louis Pope, inspires employees to become responsible citizens. Everything initiated by US Synthetic is based on the adage about teaching a man to fish, that giving someone the knowledge and tools to empower themselves yields the highest returns.

“None of our programs are intended as handouts,” Modersitzki says. The flagship program US Synthetic and its employees have undertaken is helping extremely impoverished women in Kenya to start their own businesses. Ten years ago, Pope embarked on a relief mission in Kenya with Choice Humanitarian and was inspired. He founded Yehu Microfinance, which, through donations, provides financial and other support services for small businesses owned by very poor women in the rural coastal region of Kenya. US Synthetic and Yehu work in conjunction with Choice Humanitarian, an international NGO specializing in village development. Yehu has given 20,000 loans (from $80 to $250) to 14,500 individuals with repayment rates of 95 percent.

Located in Orem, US Synthetic is a long way from Kenya, and Modersitzki says it’s hard to calculate how these good works pay off. “But, there’s been an outcome of internal ROI,” he says. “We have 450 employees and I think it’s helped us unify. They jump at the chance to help.”

Focus, focus, focus

While US Synthetic employees have taken on their own additional charitable projects in Kenya, the marquee program remains helping the women of Yehu. This is a good example of how a company should concentrate its giving. When it comes to the stock market and financial investments, diversification is the key to reducing risk. The opposite is true for philanthropic investments.

Giving can be focused in creative ways that can be fulfilling and rewarding. Follow your passions and your employees and customers will follow your company. Efforts may lead toward one neighborhood, one cause, one organization, one very specific need, whether it is a community garden, a shelter or an annual food drive. Bayle says that most givers are “wide open” to causes, and are drawn to the United Way because it serves so many organizations, meaning “one gift serves so many different needs,’ she says. While the organization itself focuses on efforts of education, income and health, it encourages people to get involved in many ways, via a three-pronged approach of give, advocate or volunteer.

“Advocacy is a scary word to people, but it can be as simple as writing a letter or talking to friends about an issue,” Bayle says. “And once a person volunteers, they understand the problems much better.”

Use your assets

In 2008, among all the volunteers in America — 61.8 million people giving more than 8 billion hours of service worth an estimated $162 billion — Utahns gave the most, ranking No. 1 in the nation (www.volunteeringinamerica.gov/UT). Based on data collected from 2006-08, 43.5 percent of Utahns volunteered 150.3 million hours of service at a value of $3 billion. Bottom line: Utahns — your employees — already embrace an attitude of charity, making them willing partners in your charitable efforts. If your company does not have the resources to make a financial donation, encourage your employees to take up the cause.

A company’s second asset is its expertise. In a 2007 article on Forbes.com, Matthew Kirdahy quotes Harold McGraw III, CEO of the McGraw-Hill Companies. “In a committee message, McGraw wrote: ‘Corporate giving has evolved from “checkbook philanthropy,” in which corporations used to satisfy their obligations simply by writing checks, to “strategic philanthropy,” in which businesses are aligning their giving programs more closely with their expertise and capabilities.’” If your firm specializes in computer training, for example, it would be valuable to donate training time. One person trained may be the catalyst to change one life and lead to the progress of an entire family, even a community.

Image matters

You never know when your charity will come full circle. A 2007 research report, The Cone Cause Evolution Environmental Survey, showed that “cause has gone mainstream.” The majority of Americans now believes and wants to support corporations that give back. And, according to the report, “while cause promotions remain an effective business strategy to increase short-term sales, superficial one-offs are no longer enough.” And on the flip side, consumers may become activists if companies engage in negative business practices.” Choose your gifts wisely, make a long-term commitment, then make sure your clients and customers know about it. This kind of giving creates an entirely new type of brand loyalty, and in the end, incalculable ROI.