As social, educational and environmental agencies and other not-for-profits struggle with reduced funding, it's a good time to take on questions about the business community's responsibility to provide support, especially in a downturn.
For starters, what has philanthropy got to do with capitalism?
We can trace this dialogue back to some of the architects of modern capitalism, such as Adam Smith, who not only wrote The Wealth of Nations, but also a lesser-known but no less important piece, The Theory of Moral Sentiments, where he lays out the desire and need for us to help our fellow man.
The work of Smith, as well as the practices of generations of capitalist philanthropists, from Andrew Carnegie to Bill Gates, suggests that we should be sensitive to the difference between mere "capitalists" and "complete" or "good capitalists."
Today, we face the call to reject the notion that a company's only objective is to retain a myopic focus on shareholder wealth. Bill Gates and others have called for a new model of "creative capitalism" that blends profit and philanthropy through both corporate and individual involvement in addressing social and environmental issues.
The proponents of a more complete model of capitalism will note that being good is, in turn, a boon for the bottom line: Companies with strong support in their communities are more likely to garner business and support, as well as increased employee engagement, especially in tough times.
Why should we give? There is a long list of reasons. They range from higher-level, "greater-good" rationale, such as giving back and making a better society, to the simple and more mundane - because you received value from an organization or institution or because you simply want to see something done.
So why is it important to give now?
First, the need has never been greater. If business can help communities and institutions in these times, it only reinforces the positive aspects of capitalism. Second, Canadians still have room to increase the number of donations and the value of their gifts to charities. What better time to improve our performance than in the time of greatest need? Finally, giving now is better than giving later; we get to witness the results of our investment sooner.
As Voltaire noted, waiting to our end may not quite meet the spirit of giving: "The man who leaves money to charity in his will is only giving away what no longer belongs to him."
To donors, we offer seven considerations when formulating your strategy for giving so that you, your business and the charities who receive the money all maximize value in these times.
First, articulate your philanthropic purpose and focus your giving on charities that will meet those objectives. Explore whether giving to capital projects, endowment, programs or operations is the best way to meet both your and the not-for-profit group's objectives. Regardless of where you give, the key is that your gift increases the organization's ability to execute its mission.
Next, having articulated your purpose, look for not-for-profits that have a compatible mission and clearly articulated vision. Organizations that operate with a clear, shared purpose and direction are more likely to achieve it.
Third, look for effective and appropriate management, not just low administration costs. You want to invest in organizations that have "overhead" suitable to their mission, strategies and tactics to deliver the desired end result. Because, in the end, "best practice" does not always equate to low overhead.
Fourth, look for charities where all members of the board have personally committed resources to the organization. You want to see that board members are donating time, talent and treasure to ensure real interest and commitment. Their investment will help ensure that yours is well stewarded.
Fifth, understand how the group defines and measures its results. Results are important, in both for for-profit and not-for-profit groups. Ask for the organization's business plan, operating results and report card.
Sixth, look for charities where the staff is committed and happy. A fully engaged team is more likely to deliver the desired results. Check the mood of the employees; ask for information about staff turnover and volunteer engagement.
Seventh, search for organizations that will work creatively with you to achieve their goals by piggy-backing on other resources you have to offer not just money.
If you are leading a not-for-profit group as a member of its board or executive staff, it will be helpful to think about these seven points from a reverse perspective.
Learn your donors' philanthropic objectives; clearly articulate your mission, vision and strategic priorities; ensure that your administrative costs reflect what is required to successfully execute on the aforementioned; encourage a culture of giving among your board members and senior staff; measure and communicate your results honestly and accurately; be certain that your leadership is creating a positive environment for staff and volunteers; and look for ways to engage your supporters beyond asking for their financial investment.
This is the best way to ensure that your organization is top-of-mind as the economy recovers and the potential beneficiary of donors' improved fortunes.
Still, it will likely take a decade to fully recover from the current downturn. Expectations need to be reset; giving in the United States declined 5.7 per cent in 2008 from 2007. And as one senior executive with whom I recently spoke noted: "Some causes just don't get it, by coming in with unrealistically high requests that could only be met if boom times only got better."
He went on to say, in a way that has been echoed by many, that he would more likely donate to those who are realistic about their own plans and expectations.
To everyone involved in social enterprises and to businesses, big and small: Let's continue to make this a better world by working together.
In the words of Buddha: "If you knew what I know about the power of giving, you would not let a single meal pass without sharing it in some way."
Daniel F. Muzyka is dean of the Sauder School of Business at the University of British Columbia, where he is the RBC Financial Group Professor of Entrepreneurship. He wrote this piece with the assistance of Sheila M. Biggers, assistant dean, development, at the Sauder School.
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