Three Steps to Prioritizing Your Company’s Charitable Giving

This time of year most businesses find their mailboxes and inboxes overflowing with donation pleas. It seems like more requests come your way every year.  There are so many good causes, especially in our tri-county area—how can you decide which organizations to give to? As a business person and a caring individual, you want your dollars to have the greatest impact on your community. You know you’ll have to say no to some of the requests, but how will you decide? Following this three-step process may be helpful in prioritizing your philanthropic decisions.

 Step 1: Identify Why You Are Giving

Today many companies are realizing that charitable giving goes hand in hand with financial out-performance. So they make sure that philanthropy is a key component of their strategic business plan. Studies have shown that when price and quality are equal, customers will do business with companies that support a cause. This is one reason many companies regularly publish corporate social responsibility reports on their Websites for all to see. However, the reputational benefits that flow from acts of corporate citizenship depend on their being perceived as genuine acts of citizenship. You don’t have to be purely altruistic in your motivation, but neither should your marketing be dressed up to look like citizenship. Customers respond best to businesses that are guided by a core ideology—core values and a sense of purpose beyond just making money.

This is why the first step—Identify Why You Are Giving—is so important. In order to ensure coordination between your head and heart, you must first identify what motives drive your company’s giving engine. You as the owner of your business can make all the decisions about giving or you can enlist the input of your employees. Including employees in the giving decisions can increase morale, strengthen their commitment to the company, and even enhance their job performance.

Don’t feel daunted by the sheer number of good causes to choose from. Start by making a short list of ‘cause categories’ that resonate with you and your employees. Once you identify the causes, prioritize them in order of importance to you. You may want to choose just a few that fit with your business. Once you have your list of types of causes, you can begin to identify and then prioritize organizations that serve those causes.

For example, if you own a restaurant you might want to give to the local FoodBank. It was just announced that Kohl’s in Santa Maria chose to combat childhood obesity by donating to the Marian Regional Medical Center. You can choose nonprofits based on how their mission resonates with your company’s values or you can choose a variety of organizations that reflect individual interests of your employees.

Are you passionate about causes that help keep women and children safe like CALM, CASA, or DVS? Do you care more about providing housing like Habitat for Humanity, Peoples’ Self Help Housing, or Transition House? Is your biggest interest animals like Wildlife Care Network or the Santa Barbara Zoo? Are you interested in end of life care like Hospice of Santa Barbara? How about helping people recover from addictions like CADA or Rescue Mission? Maybe you are most interested in helping the poor like Unity Shoppe or Casa Esperanza. Perhaps you prefer to donate to environmental causes like Community Environmental Council. Or maybe you are more drawn to the arts and music like Music Academy of the West, Santa Barbara Museum of Art, Santa Barbara Symphony, Lobero, or Ensemble Theater. Or perhaps older adults concern you most like at the Friendship Center or Visiting Nurse Hospice Care. You can also consider museums such as the Natural History Museum or the Maritime Museum.

Step 2: Determine Which Organizations You Will Give To

Once you have identified your company’s motives for giving it’s time to decide where your gifts will go. Take a look at the list of nonprofits you compiled from Step 1. Rank the organizations in order of their priority to you.  Step 2 will help you choose charities that are truly making a difference and are going to be around for awhile. You want to be sure that any donations you give support organizations that are financially stable, well-run, and achieving results for their mission.

Surprisingly enough, nonprofits can be more complex than for profit businesses, so it’s important to check some key indicators of success. Whether you are considering giving to a small community nonprofit or the local chapter of a nationwide organization, it’s a good idea to take a closer look. First, get to know your local charities—meet the executive director, take a tour of their facility, and pay attention to their actual work within your community. Find out who serves on their board of directors and if the board members are donors to the organization. If board members are not willing to contribute to their own organization, why should you? Do you see the agency making a difference locally? Ask around—do they have a good reputation? Find out if they follow a current strategic plan. Maybe you would even like to volunteer and encourage your employees to volunteer.

You can review the finances of any nonprofit with a 501(c)3 tax exempt status by examining its 990 tax return at www.guidestar.org. Pay special attention to Guidestar’s new product, Financial Scan which focuses on each organization’s impact and financial health. While the rule-of-thumb is that a charity should spend no more than 25% of their budget on fundraising and administration and 75% on programs, the more important indicator is the result the organization is making in the community. Another important consideration is whether the organization can sustain its programs over time. Their 990 will reveal whether they are able to grow their revenue at least at the rate of inflation, continue to invest in their programs, and maintain an appropriate reserve account for unexpected expenses. These are all indicators of economic sustainability and accountability.

Logging onto www.charitynavigator.org will yield a treasure trove of valuable tips on philanthropy. Keep in mind that a nonprofit’s full cost of doing business includes: 1) direct costs of delivering programs; 2) indirect costs to support effective program delivery such as fundraising, marketing, management salaries, occupancy, and infrastructure; and 3) costs related to strengthening the balance sheet such as investments in facilities and other fixed assets and reduction of debt. Don’t be surprised by high percentages spent on personnel costs. It’s common for human service nonprofits to spend 52% to 75% of their management and general funds on personnel expenses since this is usually the vehicle for delivering their services. 

Step 3: Choose the Best Giving Vehicles for Your Company

Now that you have identified your company’s motives for giving, prioritized your areas of concern and organizations that fulfill those missions, and investigated the financial viability of some of your favorite organizations, it’s time to decide how you will give and how much you will ultimately donate.

Businesses can add value to nonprofits in a number of ways. Of course, the simplest way to give is simply write a check. Whether the funds come from your marketing budget or from your sponsorship budget, you will want to give serious consideration to ways the nonprofit can publicize the gift. Making sure the public knows that your company is giving back to the community is not about bragging; it’s about following a solid business best practice.

Other ways of giving to nonprofits include sharing your company’s expertise—financial, marketing, business planning, etc. Co-marketing is also an option. Including a nonprofit in your marketing ad will not cost your company anything, but it will increase the nonprofit’s visibility. It will also help deliver the message to your customers that you care about the well-being of the community. Remember that volunteering your time or your employees’ time can yield multiple advantages.  Nonprofits will benefit, your employees will feel more engaged, and it can increase your company’s understanding of needs in the community.

You are now ready to make your contributions with the certainty that they will make a significant impact in your community and on your business. Your gifts will make a difference and the organizations you give to will be the ones that are strong and viable for the long-term. You may also consider joining the recently-formed group, Corporate Philanthropy Roundtable (CPR). CPR exists to foster discussion and best practices between companies. Businesses of all sizes are invited to learn, share and discover why corporate giving matters to business and to the community.