Can businesses benefit society and their bottom lines at the same time? At first glance, the question might seem a bit naïve. Just ask the ISP that enables distant relatives to stay in touch over the Internet, or the pharmaceutical firm that develops drugs that help people live longer. These firms are geared toward maximum efficiency, and are providing a benefit to society simply by doing what a business is supposed to do.
Perhaps, say the authors of a new book, but today’s businessmen are missing a golden opportunity to further enhance the bottom line through partnerships with nonprofit groups. The authors identify three forms these partnerships can take: “philanthropic exchanges” (this is the most well-known partnership in which businesses underwrite a charitable initiative); “marketing exchanges” (where a business or nonprofit lends its logo, name, or reputation to the other); and “operational exchanges” (where a business provides a nonprofit with the use of its facilities or contracts with a nonprofit to provide services).
Of the three, the marketing exchanges are the most recent development, having gained popularity in the 1980s. Considering the lengths businesses will often go to to burnish their reputations, it should come as little surprise that firms increasingly covet the opportunity to be identified with a good cause. Ben and Jerry’s Ice Cream’s long association with environmental issues, for example, continues to help the company’s image. In fact, a recent Wall Street Journal survey crowned it the best American company in its dealings with “communities, employees, and the environment.” But these partnerships are risky for businesses for exactly the same reason. Nonprofits are not immune to corruption, as the United Way scandal of the early 1990s illustrates.
To make the case that partnerships can provide benefits to both nonprofit and for-profit firms, the authors present six cases in which businesses have joined with nonprofits to tackle social problems, including:
- Home Depot’s partnership with KaBOOM!, a nonprofit that builds playgrounds in inner-city neighborhoods;
- Microsoft’s partnership with the American Library Association to provide libraries in poor neighborhoods with computers and Internet access;
- Denny’s support for Save the Children;
- Boeing’s partnership with Pioneer Human Services, a social enterprise that provides jobs for recovering substance abusers.
These and other case studies provide a wealth of information about the underlying motivation for the partnerships, the key actors who initially conceived of the ideas, those involved in planning and discussions, and the eventual implementation. The case studies alone make the book worth its $27.50 cover price, because they add to the growing body of public knowledge regarding these partnerships and show—despite the unflappable optimism of the authors—that the benefits remain difficult to assess.
The optimistic authors are Eli Segal, former director of the AmeriCorps program and currently director of the Welfare-to-Work project, and Shirley Sagawa, who was executive director of the AmeriCorps program under Segal and currently works as a deputy chief of staff to First Lady Hillary Clinton. Sagawa and Segal contend that businesses, government, and the nonprofit sector are now “co-dependent” and exist in a “New Paradigm.” Moreover, the two argue that with economic uncertainty from globalization and decreasing funding for nonprofit activities, for-profit and nonprofit firms need to enter into partnerships simply to survive.
The rhetoric here appears overblown. It is beyond dispute that economic uncertainty abroad has implications for American businesses, but it hardly follows that businesses would be wise to respond by dedicating time, energy, and money to developing relationships with local nonprofits or to supporting charities in the community surrounding their offices, stores, or factories. These are certainly worthwhile endeavors, but they are motivated at least in part by charity, not the bottom line. When a firm is losing money and laying off workers it may be impossible to justify supporting a particular charity or nonprofit initiative.
Take the case study cited by the authors between the Boeing Corp. and Pioneer Human Services. The partnership provides benefits both to Boeing, which obtains supplies at a discounted price, and to Pioneer, which receives a steady flow of orders for its workers. So long as the strong economy and flow of government contracts continue, Boeing will be able to uphold its end of the partnership. But if the aerospace industry suffers a setback, won’t the relationship with Pioneer as well?
Segal and Sagawa attempt to answer this by arguing that business executives should continually reevaluate the programs they support and ask what benefits they are receiving. This sounds very businesslike, except that the “benefits” are often difficult to quantify. Even in some of the hand-picked case studies cited in this book, it remains unclear whether the partnerships provided much of a benefit to business.
For example, BankBoston vice president Ira Jackson assessed the bank’s support of City Year, a volunteer group the bank helped launch, in the following way: “We are coming to the realization that having a heart, making a difference, not just a profit, helps us feel good about ourselves.” On the other hand, the benefit of these programs to participating nonprofits is clear, since it can usually be measured in terms of that mother’s milk of nonprofits—money.
And while the benefits to business are sometimes unclear, the challenges of partnering with a nonprofit are not. It is precisely because “forward-looking” businessmen quickly learn that supporting charity is often just as demanding and difficult as running their business that they tend to shy away from the effort that is required to make the partnership a success. All too often, CEOs reduce charity to simply writing a check; others delegate the responsibility to a “corporate contributions” officer who parcels out modest grants to groups that purport to do good works. Even worse, there tends to be little oversight or follow-up on these grants, and as a result businesses have a difficult time assessing whether their charitable giving has been beneficial to the firm, to the recipient charity, or to the broader community.
On a broader level, this book is a cause for optimism. It proceeds from a certain faith in the capacity of business and the nonprofit sector to work together in strengthening civil society and helping the less fortunate. Given that the book includes a note to the reader from Hillary Clinton, often an advocate for closer alignment between nonprofits and government, it is an encouraging sign that a new consensus may be emerging among the political class about the limits of government action. One can only hope. Whatever the limits of its benefits for business, this is a conception of the “common interest” that bodes well for the future and the “common good.”
Damon A. Vangelis is a program associate at the John M. Olin Foundation in New York City.