Episode 195: Corporate Giving Trends | By Looking Back, the Future is More Clear
Welcome to another edition of Around with Randall, your weekly podcast for making your nonprofit more effective for your community. Here is your host, the CEO and founder of Halette Philanthropy, Randall Hallett.
I can't tell you how much of an honor it is to have you join me for this edition of Around with Randall. Every once in a while, you're at a conference or a gathering, and you're thinking, maybe this isn't something I need to pay much attention to—it doesn't apply to me quite as much. But then, you actually decide to listen, and you walk away thinking, "Okay, that was amazing."
That's exactly what happened to me. I am incredibly fortunate to have been invited and accepted as a member of the Giving Institute, which partners with the Lilly School and Giving USA to track philanthropy in the United States. I was at a conference, and it was kind of a last-minute fill-in. A friend of mine, an incredibly well-respected colleague, was responsible for ensuring the program ran smoothly, and he needed a substitute. He brought in a group to talk about corporate giving.
I don't do a lot in corporate giving other than some basic things, but when they finished, I found myself taking notes like crazy. I want to share some of these insights that I think are really important for our corporate giving efforts. More importantly, I want to discuss how this information can fit into the larger scope of your overall philanthropy and make it more effective.
So, let's start with what we heard. I want to give credit to the Sartel Institute, an interesting organization that gathers local community CEOs and brings them together to discuss community interests. As heads of corporations, these CEOs obviously have a corporate mentality when it comes to their philanthropy on behalf of the organization.
They spoke about how they're building out a model that has been successful in Philadelphia for a while, and they are looking to expand into other markets. The goal is to bring collaborative philanthropy from the corporate perspective to local communities. There are a couple of places where they're starting, with Philadelphia being at the top.
They discussed corporate philanthropy from both a historical standpoint and in terms of what's happening today. When we think about corporate philanthropy as a whole, we need to go back in time, particularly to the period after the Industrial Revolution. At that time, philanthropy was really driven by one person.
For example, in the steel industry, which was dominated by one company—Carnegie Steel—Andrew Carnegie made all the decisions regarding philanthropy, especially after he sold the company to U.S. Steel. Similarly, John D. Rockefeller with Standard Oil and Henry Ford with the Ford Corporation made these decisions individually, or perhaps with one other person. In many cases, the philanthropy wasn't done through the corporation but after the company was sold, or they were giving away stock or other assets.
In the early 1900s, during the early part of the 20th century, it's estimated that about 30% of their net revenue went to philanthropy in some way, shape, or form. This was particularly evident during the Great Depression when corporations were asked to do an immense amount to stabilize cities by providing basic services like food, housing, and other necessities.
I think about the story I got from my dad and grandfather about my great-grandfather owning a jewelry store in Lincoln, Nebraska. When they wanted to build the football stadium, they kept coming back to them, asking if they'd buy more tickets because they needed corporations to do this. There was a mentality that corporate responsibility was local in some way, shape, or form. While a few bigger conglomerates existed, most corporations were smaller, so it was about 30%.
Then we get to the 1950s, and there was a huge change in leadership, which I write about in my book, Philanthropy from a Leadership Perspective. There was a perceptual change among CEOs, and with that change, there was also a shift in corporate philanthropy and where corporations fit in. Philanthropy actually dropped from 30% during World War II to about 6% of pre-tax revenue in the 1950s and 60s, moving into the 70s.
This shift was driven by the need to satisfy two entities: stakeholders and stockholders. The first entity was the owners, the people who bought stock with the huge growth in the public nature of corporations. The second entity was the local community where the corporate headquarters or the largest pieces of the corporation were located.
That's what drove it. And unless you had a stockholder who could walk into the room or someone on the corporate board saying, "Look, we need to prioritize this," the philanthropy was very standardized. It focused on universities, some healthcare, better communities overall, a lot of parks, and infrastructure growth. This trend continued for probably 40 to 50 years.
We began a shift into the 2000s, leading to where we are today. In the 1990s, we saw corporate giving drop to 2% of pre-tax revenue, with the same emphasis on the bottom line, the stakeholders, and the shareholders. Today, it's actually less than 1% of pre-tax revenue.
What we're talking about today is the CEO's philanthropy—how they view and lead it. They see the corporate board's organizational effort as being more focused on a pivot toward the employees. One of the greatest challenges, which we all think and talk about—but perhaps don't connect to philanthropy—is maintaining and attracting employees. We're seeing a generational shift at the same time.
I'm Generation X, probably more aligned with the baby boomers in terms of my philanthropy. But we know millennials, who are now the largest generation, and Generation Z, which is coming after them, are more interested in the global good—not traditional philanthropy like baby boomers and most of Generation X. Their personal belief systems have to align with where they work, and part of that is the company's philanthropy and what it's doing to make the world a better place.
At the same time, we're having trouble attracting and maintaining employees. So, if we need to keep those employees, philanthropy is one way we can show and connect the ability for us to have a satisfied retention process. One thing we can do is give employees more input when it comes to corporate philanthropy. It's not just about what's in the best interest of the stakeholders—they make their money on the investment side. What we're talking about is how we can improve that particular outcome through philanthropy and employee engagement.
It's also important to note that corporate giving has dropped to the lowest level we've ever had—less than 1% of pre-tax revenue. With less money at stake, corporations are using it for their best interests, which includes focusing on employees.
I frame this not because I wanted to give you a history lesson today—I apologize for the seven or eight minutes that I've spent on this—but because I think there are some interesting trends here. Now, let's get into the tactical side: what are we going to do about it?
You can't understand the recommendations until you understand the history. If you're doing corporate philanthropy like you did 30 years ago, you're not going to get the results you want. The first thing to say is that I've always believed this, always preached this, and always taught this: corporate philanthropy is not about the application.
The first tactical solution is about a personal touch. You need to know who the points of entry are. I didn't say what the points of entry are; I said who the points of entry are. People accept applications. People are the entry point for conversations. They get a lot of organizations coming to them, saying, "Would you give us this?" If you're looking for more than $500 to play in the golf course, then you probably want a personal relationship with someone and begin to ask questions.
Whether you ask what they've done in the past, their process, their timeline, what the ranges are, what the application looks like, or what they're looking for when they make these decisions—who's making these decisions? All too often, I hear people say, "We submitted to one of our large corporations, but we didn't get any money." I ask, "Well, did you make a phone call? No. Did you talk to anybody? No. Do you know anybody? No? Did you ask what's of interest to them?"
You've heard me talk on this podcast constantly over the last year or year and a half: quit talking at people; talk with people. Ask them what's important to them. The same is true for corporations.
So the first thing is, create a dossier on a corporation, but don't create it just on the corporation; create it on the people who are part of the philanthropy decision-making process. Who are they? What do they believe? What are their passions? What are their communication choices? Corporations aren't just nebulous clouds. They're made up of people, and people make these decisions.
Number two, because of this displacement, we've gone to a remote work environment. I talked about here, in the historical piece, that it's about keeping employees. Well, as we moved into the remote work environment, that's meant that more employees are dispersed into different places. And that also means, according to Sartel Institute, that corporate leaders wanting to find ways of engaging the community, don't just look at it as their community anymore, being where the corporate headquarters are. It's where the employees are.
So, my father-in-law lives in Atlantic, Iowa, about an hour outside of Omaha. What we've noticed is there's been an intake of people. When you talk to these people, they're now remote working from Los Angeles and Detroit. My father-in-law is fascinated by this because it's not the world he grew up in. He's like, "They're working every day, nine to five or eight to five or whatever." For people who aren't anywhere near Atlantic, Iowa. Well, if a key employee lives in Atlantic, Iowa, and they wanted to retain and maintain that relationship, the corporation with that person, that employee, they'd be interested in the philanthropy in Atlantic, Iowa, where that gift could be possible.
This all goes to say, you need to identify local leaders, local connections. Even if the corporation is headquartered way over there, the more people you have locally, the better the opportunity you have to influence some decision-making in corporate philanthropy. Sartel Institute talked about this constantly. We just think of, well, they're in Philadelphia. Yeah, but if they've got a whole bunch of people living in Omaha, maybe they have more of an interest in Omaha because they want their people to be interested in Omaha. So, identify those local leaders.
Number three, think beyond your needs. One of the things that we see, and I saw this with one of the people that I have immense respect for as a philanthropist, is when I took the job at the University of Nebraska Medical Center, they told me this very concept. This was 15 years ago, 17 years ago, not quite 15 years ago. Everybody keeps wanting money from the same people, but they don't think about what we want to accomplish as the community leaders. And this is a major philanthropist, a major community leader. So, I positioned that in my head, and now I heard it again at this presentation.
Let me give you an example of what I'm talking about that'll make more sense. A client is doing a particular capital campaign project. We're running into some delays because of things that aren't actually the fault of philanthropy, but we have to deal with them. We're repositioning this. People are like, "Well, why would I give to that? I'm not interested in that." The organization's had a couple of issues. We've learned to pivot because it's a smaller community; it's not five million people. This is the largest employer, so this project has an effect on the economy. We build this kind of project, and it's going to have an immense construction operation going on, which is good for the local community.
It's also about keeping jobs. This will build out a particular area of the organization where they're going to need more people, which means we are now attracting new people into the community. That's healthy. It's a tax base because all of these things, generically, are going to be taxed in some way. They don't have all of the nonprofit, non-taxable things that some organizations or some states might have. There's a little bit more progressive thought on that in this particular state, so there are tax implications. They're going to become a destination for a particular issue, which means people are going to come to them. This now affects hotels, restaurants, gas stations, local laundromats, and more, because if you're there for a period of time, you're going to the park, or you're going to the movies, or doing something different.
We began to reposition this, and all of a sudden, we got the business leaders to say, "Oh, this isn't necessarily about just that project, which I'm not sure applies to me directly, but it's going to do all of these things that affect my business." This is also the type of project that's going to lift the common good, and that means keeping and attracting employees for these individuals. My point is that if you just say, "We need this because we need this," like the gentleman philanthropist I was telling you about, you missed the point of what's of value to them. Talk with people, not at them.
What's your biggest concern? I don't have enough staff. I'm having trouble attracting new employees, or in smaller communities, there's a limited talent base. Look at what we could do to help with those issues. View this in a wider perspective. That's number three.
Number four, keep corporate philanthropy in proper proportion. I was at another client. We were just beginning campaign conversations, and one of the board members says, "We should go to all the corporations." I said, "Let's look at the data." This comes from the Giving Institute, and we are very fortunate to have access to this data. We're now up to about 64% of our donations coming from individuals. I've said this since I first loosely got involved in the organization. This is a true, accurate statistic. I understand why you track it. Because bequests make up another 8%. Who makes those decisions? Individuals.
The largest growth in foundations and corporations, which is about 18 or 19%, is DAFs (donor-advised funds). Who makes those decisions? Individuals. Corporations account for 7 to 8%, 6 to 7%, something of that nature, in terms of total philanthropy in the United States. How many people are doing it from a small business perspective? Like all philanthropy, I make the decisions; my wife and I make the decisions on philanthropy through the corporation because it's tax-advantaged and counts as a corporate gift. Who's making that decision? Individuals.
This is to say that if you think corporations are going to solve all your problems in terms of philanthropy, you're not understanding the numbers. My guess is somewhere between 83 and 87% of all dollars coming into philanthropy are truly being decided by individuals. Individuals per se, coming out of a house or home, bequests, which are done by individuals, certainly by donor-advised funds, and now into corporations. It's a larger percentage. The reason I say that is if you put all your eggs in the corporate basket, you're going to be disappointed. You're not going to get to where you want to go. So, keep it in proper proportion. I'm not saying don't do it; I'm saying do it proportionally, but concentrate on those individual relationships because that's where the real dollars are.
I want to leave you with one final saying that they shared, which I totally stole. So, I want to give credit to the Giving Institute and their people. But when you think about corporations, think about this: If you know one company, you know one company. Every one of them does it differently. That's why we need to treat them more like individual donors.
I talked about this as the number one: the personal touch. Who are they? What are their decisions? Things of that nature. If you're just throwing in applications, you're going to get the $500 table because they feel obligated, or you're going to get the $5,000 golf sponsorship because they feel obligated. You want real money? You're going to have to do the four things I talked about, at least three of the four. Number one is to create that personal touch. Number two is to look for those local leaders, even if they don't have corporate headquarters locally. Number three is to think beyond your needs, think about the greater community, and what it means to them in terms of the organization and the community in which they have either the staff and/or the actual corporation. And number four, keep it in proportionality so that you're really getting to the dollars that you need for your nonprofit.
Interesting presentation. I wanted to share a little bit with you from what I heard and give Giving Institute credit for the work they're doing. It was really well done, and I thought this might be helpful to you.
Also, check out the blogs at Hallett Philanthropy. 90-second reads—I write all kinds of stuff about what I read, what I see, different thoughts—90 seconds, getting RSS feeds right to your inbox. And if you'd like to reach out to me, don't forget you can do that as well. Comment on this, leave a remark wherever you download or watch these particular podcasts, whatever that looks like. Communicate with me at Podcast@HalifelAnthropy.com.
We live in a time where philanthropy is playing a larger and larger, greater and greater, bigger and bigger role. This is all about how we make our community a better place. Philanthropy has an important part in that process. What I'm hopeful for in all of this is that you feel like you're making a contribution, that what you do every day has value. Even if it's sometimes not all that pleasant, it does make a difference.
Remember my all-time favorite saying: Some people make things happen, some people watch things happen, and then there are those who wonder what happened. What you do is all about making things happen for the people and places that are wondering what happened. And at the end of the day, that has value, which means you have value, and what you and what you do has value.
Every day you stop to work and every day you care about someone else, philanthropy isn’t about money, but love of mankind, love of humankind. That's what we do every single day. I look forward to seeing you the next time we're right back here on the next edition of Around with Randall.
And don't forget, make it a great day.