Strategic Philanthropy

The idea that organizations should give back to society is not new but it has only been in recent years that commercial organizations have attempted to tie in their philanthropic efforts with business objectives, marketing strategy, and overall performance.

One of the first organizations to embrace this idea was AT&T in the US, firms such as Coca Cola and General Motors were also early recognizers of the need to balance societal goals and shareholder expectations. Many similar firms have formed special units or committees responsible for overseeing these initiatives and in the US in 1998, over US$9b was donated to charitable organizations. These organizations are now starting to view these activities as no different to traditional forms of promotion in terms of budgeting and are now integrated into their strategic plans. Our anecdotal experience in Hong Kong suggests that there is a long way to go before organizations here realize or understand the benefits of strategic philanthropy. We have had many instances of large organization heads saying that there is a policy not to give money in sponsorships or other forms of charitable giving. This is ludicrous because a properly planned donation strategically thought out is likely to impact a number of organizational stakeholders and break through the clutter in ways that traditional marketing just cannot do.

Strategic philanthropy can be defined as the synergistic use of an organization’s core competencies to address key stakeholder interests and to achieve both organizational and societal benefits (McAlister and Ferrell, 2002). Whilst this definition is useful at SRC we believe it to be too narrow. Many charitable organizations have core competencies that can be leveraged to deliver breakthrough results in terms of donations for the charity and achievement of objectives by the commercial organization. All parties need to consider such arrangements as mutually beneficial and long term.

Strategic philanthropy goes beyond pure sponsorship or cause related marketing which are tactical level tools that tend to be short term in nature and are designed to increase sales and/or brand awareness and affinity with the target market. Although these activities are effective many consumers find it hard to relate an organization to a particular cause even though research shows around 50% would prefer to buy from socially responsible firms. Because strategic philanthropy is more mission based and involving, it is likely to create a more forceful impact on a number of organizational stakeholders. Such philanthropy is designed to address societal problems by leveraging the competencies of the organization and simultaneously improve the organizations competitive context and reach its target market. The results of such programmes are likely to be long term in nature.

Much research points to the benefits of strategic corporate social responsibility (CSR) in terms of improving the business context of firms, financial performance, and even the satisfaction of employees. In the US for example, a number of PSFs are using CSR as part of their overall strategic initiatives.

To see how SRC can help in building your strategic philanthropy efforts, contact Robert Sawhney: bob@srchk.com