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(Originally published in the May issue of Corporate Philanthropy Report, available online to current subscribers at publication.)

A new study of grantmaking practices and strategies shows that funders who actively listen to and learn from their grantees are more likely to provide the types of support that grantmakers and grantees alike agree are essential to boosting nonprofit success.

The study, commissioned by Grantmakers for Effective Organizations, surveyed about 750 grantmaking foundations to get a picture of how their practices and funding strategies had changed since GEO last surveyed the group in 2008. The 2008 survey revealed what GEO called “a persistent gap between nonprofit needs and grantmaker practices.” That survey and a corresponding report highlighted a series of core grantmaking practices that correlated with nonprofit success, including taking the opportunity to identify lessons learned from their grantees and sharing this information with others, and engaging grantees and stakeholders at key decision-making moments, including strategy setting.

Looking at responses from the 2011 survey, GEO researchers spotted a key trend: funders that followed those practices—those that actively engaged their stakeholders and solicited feedback through various means—tended to provide their grantees with the most effective types of funding. For example:

• Grantmakers who always used grant reports to foster learning between the foundation and its grantees were three times more likely to increase multiyear grantmaking than those who never did.
• Funders who always sought external input on foundation strategy from recipient communities or grantees were nearly three times more likely to increase general operating support than those who never did.
• Funders who always sought advice from grantee advisory committees were about twice as likely to increase capacity-building support.
• Funders who always sought external input on foundation strategy from recipient communities or grantees were about twice as likely to increase capacity-building support.

Even in light of limited and/or shrinking giving budgets, most grantmakers chose to preserve their investments in general operating support (51 percent, unchanged from 2008) and capacity-building support (59 percent, also unchanged from 2008) at the levels they had before the recession hit, and upwards of 30 percent even increased these types of support. Grantmakers who increased these investments indicated that the changes were unrelated to the economy, which, according to GEO, shows that these types of support are becoming core elements of foundation grantmaking strategy.

“There’s no doubt that the past several years have required nonprofits to be creative and nimble in order to stay afloat and effectively serve the growing need in their communities,” said J. McCray, author of the study and GEO’s chief operating officer. “One of the most critical decisions a funder could have made in the past several years was to increase the types of support nonprofits need to address the ever-changing needs in their communities—general operating, multiyear and capacity-building support.”

Compared to 2008, funders are now more likely to solicit feedback from grantees to strengthen foundation performance, the survey found. Nearly a third of funders surveyed in 2011 said that they solicited anonymous feedback, with a similar amount collecting it on the record.

However, when it comes to most other forms of stakeholder engagement, grantmaker practices have not changed much since 2008. According to the report, around 58 percent of foundations surveyed reported they assess the needs of communities, roughly half invite stakeholders to address board members (53 percent) or provide input on foundation strategy (51 percent) or grant proposals (49 percent), and a small number delegate funding decision-making power to stakeholders (16 percent).

“The nonprofit sector has been forced to deal with significant challenges, including volatility in investments and unreliable donor commitments, that have pressure tested funding strategies and grantmaking practices,” said McCray.

To read the study in full, go to www.geofunders.org.

(Originally published in the April issue of Corporate Philanthropy Report, available online to current subscribers at publication.)

In recognition of International Corporate Philanthropy Day, it is becoming ever more common for companies to launch new initiatives aimed at bolstering their community investments. This year was no different, as ICPD—which took place February 27—brought out numerous announcements from attendees at the Committee Encouraging Corporate Philanthropy’s annual Board of Boards CEO Conference, which convened some 80 CEOs from leading global corporations for a series of meetings and workshops aimed at raising the level and quality of corporate philanthropy.

Coinciding with the event, many CECP member companies announced new initiatives, as well as expansions of current programs, including:

• Meritor Inc. Meritor is a global provider of drivetrain, mobility, braking and aftermarket solutions for the commercial vehicle and industrial markets. The company has a tradition of social responsibility and investment in the communities where its employees live and work, with employee volunteerism serving as a core component of its community support. Meritor is preparing to take these efforts to a new level in 2012. The company announced a new volunteerism program called the Power of Volunteering, which includes an ambitious target of reaching 40,000 hours per year of employee volunteer activities by 2020. To support employees in meeting the goal, the company is using a web-based tool allowing employees to track their hours through VolunteerMatch.

• Moody’s Corp. Moody’s plans many events and programs around ICPD. For example, the company’s CEO, Ray McDaniel, sends out an e-mail to all of Moody’s offices worldwide recognizing all of the employees who participated in company-sponsored volunteer programs the previous year. Employee volunteers also receive a personal letter of thanks from McDaniel and Fran Laserson, president of the Moody’s Foundation. This year, the company announced a new program that puts the skills of Moody’s employees to use in the service of aspiring job applicants. Dubbed Moody’s Interview University, the program will provide mock interviews for students, Moody’s Foundation grantees and community partners, with Moody’s employees playing the role of interviewer.

• Samsung. This year, in celebration of ICPD, Samsung donated its sixth assistance dog to a school in the United States with the help of the National Education for Assistance Dog Services. Samsung teamed with NEADS to pair an assistance dog with the winning school of the company’s Solve for Tomorrow essay contest, which asked teachers and students to describe how math and science could help improve the environment in their communities.

The company sought to raise awareness among its employees about its partnership with NEADS and the benefits these dogs bring to children and adults with disabilities. As part of that effort, Samsung employees were invited to a workshop series where they heard from NEADS director John Moon, as well as a local war veteran and her assistance dog. Moon and his guest led a discussion with employees on the benefits of service dogs and explored volunteer opportunities. 

• State Farm. State Farm took the opportunity on ICPD to launch a new grant program open to communities across the country. The new program is part of the company’s Youth Advisory Board initiative, which allows youth to play a role in improving student achievement in public education by funding student service-learning programs. According to the company, the new grant opportunity will reach a broader audience and provide an opportunity for community members to raise awareness of issues in their neighborhoods. The $25,000 grants will be awarded based upon the input of community members from across the country.

• Western Union. In recognition of ICPD, Western Union announced a suite of new services developed specifically for nonprofit organizations. The new options, available worldwide, will simplify how these organizations collect and move money, cutting their costs and enabling them to focus fewer resources on administration and more on their key missions, the company said.

The new services include specifically designed software to help nonprofits collect and move money more efficiently. By eliminating financial intermediaries and reducing the number of currency conversions through a “point-to-point” offering, complexity will be reduced and money will move faster, the company said.

To see what other companies did to celebrate ICPD, visit the CECP website at www.corporatephilanthropy.org.

(Originally published in the March issue of Corporate Philanthropy Report, available online to current subscribers at publication.)


A new study conducted by researchers at Indiana University shows that corporate giving in the form of product donations offers numerous advantages that companies miss out on if they get rid of unwanted inventory in other ways.

In a nutshell: donating products to charity helps businesses’ bottom lines, reduces waste in landfills and provides relief for people in need, says lead study author Justin Ross, assistant professor of public finance and economics at the university.

The study, “The Business Case for Product Philanthropy,” provides what Ross and his colleagues call the first detailed analysis of the return on investment for donating merchandise as opposed to liquidating or destroying it. The study looks at the issue from the standpoint of inventory management, a business process that many corporate sectors—especially retailers—have to contend with.

More specifically, Ross looked at how businesses handle products such as undamaged customer returns, customer-cancelled orders, slow-selling merchandise, discontinued models and mislabeled items. Traditionally, the study says, businesses have managed these inventories by making a choice between transporting them to a landfill (disposal) or liquidating them at heavy discounts (known as salvaging). In most cases, neither of these options outpace the financial advantages of donating such items to charity, Ross found.

“Based on financials alone, product donation is superior to disposal in most circumstances,” Ross said. The reason is simple: disposal costs money, and none of the costs are recouped via sales. Donations, meanwhile, allow the company to write off the transaction on its taxes under a special deduction.

That tax deduction also leads to a better bottom line than inventory liquidation or salvaging, the study found.

“While reselling inventory through liquidation or salvage markets often results in keeping just 10–30 percent of the value of the product, the special tax deduction can be as much as twice the cost basis, making it very likely that product donation will be more attractive than liquidation,” Ross said.

Product donations also stack up well against traditional cash giving, the researchers found. For example:

• Product donations are more visible than cash donations. According to Ross, product donations have an end user, whereas cash can be employed for covering nonprofit administration costs or other operational expenses.
• During recessions, the study said, cash is often a more pressing constraint as businesses look for the next viable investment, whereas inventory tends to be in surplus due to lower sales.
• Since product costs are below market value, product donations can be more valuable to the nonprofits than cash-equivalent gifts for purchasing these same products, according to the study.
• Deciding how much product to donate can be simpler than determining the amount of a cash gift, freeing management to focus on other problems, Ross said.

The report also notes the beneficial role that intermediary organizations play in the product-donation arena. The primary advantage, from the business’s perspective, is lower transaction costs, Ross found. That’s because such organizations specialize in collecting, transporting and distributing donated products from and to a national and even global base of companies and nonprofit recipients, achieving economies of scale that would be out of reach for individual companies. The report points out the following benefits that intermediaries bring to the table:

• Logistics: Intermediaries arrange for the most cost-efficient route and method for product donations, utilizing established relationships with shipping companies that, in some cases, are willing to cover the shipping costs.
• Warehousing: One of the principal benefits of product donation is freeing floor space, both at the retail and warehousing level, the report says. Intermediaries take on the burden of warehousing the goods during the storage, reconfiguration and delabeling stages, until they can be distributed to charity.
• Brand security: According to Ross, intermediaries can ensure nonprofits appropriately use donated items for charitable works.
• Media assistance: Intermediaries can also serve as a neutral third party capable of testifying to a company’s history of socially responsible actions.

“This research demonstrates that donating products can result in substantial financial and social benefits for minimal cost and risk,” said Ross.

To read the report in full, go to newsinfo.iu.edu.