Philanthropy & Co.: the benevolent bottom line

By Keith C. Epstein

updated 6:11 a.m. ET April 11, 2008

For years, Philadelphia’s orchestra and opera company could count on the region’s giant pharmaceutical companies to put money into music — lots of it. Behind the stage, SmithKline Beecham was a major player. That is, until top executives of the company realized competitors such as Pfizer and Merck had moved their philanthropy dollars out of high culture and into health care. So the top brass at SmithKline Beecham hired a new “director of community partnership” — Doug Bauer.

Bauer’s mission: Implement a fresh strategic plan, identify more relevant causes — and break the bad news to the orchestra, the opera company and to the other losers in this new order. “They said, ‘we’re a health care company,’’’ Bauer told Contribute. “Our philanthropy should be aligned with what we do — 90 percent of it should be focused on health care.” By 2000, it was — and pleas from previous beneficiaries fell on deaf ears. “We didn’t necessarily zero them out,” says Bauer. “But we ratcheted them down pretty far.” The groups weren’t happy but generally got the message. In desperation, one museum development officer offered to start an immunization program — at the museum. But Bauer knew his bosses sought a more seismic and fundamental shift.

Philadelphia’s loss to the arts was a gain for New York’s homeless. Children’s Health Fund, a nonprofit founded in the city by singer Paul Simon and pediatrician Irwin Redlener, had launched its first “clinic on wheels” barely a decade earlier. The mobile medical units deliver doctors and drugs to children in city shelters who otherwise would probably never see a physician or a prescription. Impressed, Bauer initially directed $3 million over three years to the New York nonprofit for a new referral service — managers who would make sure children could get to specialists for heart conditions, severe ear infections and other ailments. They would provide transportation, education and other help. By 2008, the effort had topped $7 million and expanded to four more cities, making it a marquee cause for the company, now GlaxoSmithKline. Since the referral initiative’s inception, more than 26,000 children have received help the program began, in large part because it became more effective as time wore on. When the program began, only 5 percent of children made it to their appointments; today, 75 percent do.

For Glaxo, its support was about more than doing good; it was doing good for its own business. “A halo created by solid corporate philanthropy that produces meaningful results aligned to a company’s competency and focus—that’s something a corporation can leverage,” observes Bauer, who joined New York-based Rockefeller Philanthropy Advisors in 2002, following a stint at global investment powerhouse Goldman, Sachs & Co. By telling doctors around the country about Glaxo–supported health care services from Los Angeles to Harlem, Glaxo figures it can reinforce branding and boost sales, says Bauer. “If a doctor has a choice about which antibiotic to use for a patient and feels one company is actually doing something with substance, that might reinforce the doctor’s choice. Philanthropy is one selling point.”  Glaxo is hardly unique. The company’s self-interested morphing from major sponsor of traditional hometown causes to mobile clinics serving New York’s homeless is emblematic of a sweeping, historic transformation in corporate philanthropy.

Corporate America’s refashioned way of doing business with nonprofits is shaking up expectations, creating challenges and suggesting new models for nonprofits to achieve goals.

Whether regarded as cause marketing, strategic philanthropy, values-led marketing, good corporate citizenship, accountability to shareholders, or a mix of such objectives, there’s no doubt about the underlying trend: Donors are snubbing some causes in favor of others tied more closely to business objectives — and expecting nonprofits to meet their own objectives, just like businesses. “Corporate philanthropy has grown up. It’s no longer writing checks to everybody in the community because you want everybody to be your friend,” observes Bauer. “Now it demands effectiveness, because of the expectations placed on the private sector to fix or change problems, reinforce its brand with its consumer base and not shortchange its shareholders.”

To be sure, the alignment of philanthropic missions with business goals is hardly a new phenomenon: decades ago, store managers, even in small towns, set out collection boxes by the cash register. And a pioneering 1983 campaign by American Express to raise money for the Statue of Liberty/Ellis Island Foundation—by donating a penny of every charge to a restoration fund — proved then-chairman Louis V. Gerstner Jr.’s suspicion that tying philanthropy directly to marketing could be more than “just an interesting formula for giving money away.” Card numbers grew, usage swelled 28 percent and the Statue gained $1.7 million.

Or consider New York clothing retailer Liz Claiborne, Inc. The issue that connected with customers was domestic violence — a connection suggested by market research in 1991. A new chief executive had his doubts and nearly did away with the campaign two years later. Without paid advertising, relying solely on free publicity— for instance, stories in women’s magazines and on the Lifetime cable network — the company managed to spread the word and acquire traction for both cause and company. Liz Claiborne Inc.’s commitment to the issue “has generated tremendous support from our consumers,” reports vice president Jane Randel. The company has since gone on to focus its efforts on public education around teen dating abuse. And while it is not spending money to advertise, it has invested $8 million in public relations work and services like a national dating abuse hotline. “They’re not just doing it as pure philanthropy,” observes cause marketing consultant Carol Cone.

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