Chapter 12
SELECTING A CHARITY PARTNER
Decisions around selecting a charity partner are faced by those entering the wonderful world of CSR for the first time as well as by advanced organisations who are looking to add a new charity partner or replace an existing one. There are several ways that a potential charity partner is likely to appear on the radar:
- An ‘experience’ may bring it to front of mind. This may be on the back of work it is doing or an interaction by a staff member, or its work may come up for some other reason, planting the suggestion that it might be a worthy partner.
- The business will invite charities to join them in partnership for a particular cause. (This is the approach often taken by Optus on its larger projects.)
- The charity approaches the business directly with a partnership proposal on a specific project.
I find through my consulting work that selecting their charity partner is often the first thing the groups I work with want to do. They will bring together a new committee or foundation team to oversee implementation of this new and often exciting initiative. The committee will come to the first meeting looking to put forward their charity partners and hoping to leave that meeting with fundraising initiatives underway. Surely giving away money can't be hard, right?
Selecting a charity partner can be a very emotional experience for those with a personal interest. The work of the committee or the board is to remove the emotion and implement a decision-making framework that will ensure the selection of charity partners is based on a set of guiding principles rather than being carried by the most vocal or emotional team member at the meeting.
Your choice of charity partners has to make sense, and often that means it's best to check the emotion at the door. Let me share with you a personal experience that is sadly not uncommon.
I was contracted to speak about leadership on Hayman Island for a pharmaceutical company that specialises in cancer treatment. In all my presentations I speak about Hands and the lessons I have learned from building it and from those I have worked with. The client who engaged me for the conference knew about my work with Hands and also knew I would share stories from it. The evening before, over a glass of very nice champagne, he informed me that unfortunately his company would not be able to support Hands in the future as they had already chosen their charity partner. To me this was an unnecessary conversation, as I had no contrary expectation. I was there to speak about leadership, not to solicit new sponsors for Hands.
I presented at the conference the next day and the stories and lessons were received with great enthusiasm by all, particularly the senior leadership team. At dinner that evening the CEO announced to rapturous applause that Hands would be their charity of choice for the following year. Naturally, given the conversation the previous evening, I was surprised.
But the enthusiasm seemed to be lost somewhere between the beaches of Hayman Island and the mainland. After returning to Sydney I was to never to hear another word around their commitment, despite my repeated follow-up.
What I took from this was that they were caught up in the emotion of the stories in my keynote and allowed that to override the logic behind their choice of charity partner. Back at the office of course it made sense that their charity partner worked within the field of cancer research. The point to this story is the importance of reaching this decision only when the emotion has been stripped away.
How, then, does sentiment apply in the case of Narta, the buying group representing electrical retailers and suppliers, and their support of an Australian charity building homes for children in Thailand? The difference with Narta is it was working with a very diverse range of members so there was no obvious charity sector it ‘should’ be supporting. It was therefore able to build its own story through investment and early engagement. Its choice of charity partner made sense because of this engagement.
Getting the charity partner right is about defining the types of people and relationships you want. To do that you need to be clear on your values, what is most important to you, and what are the negotiables and non-negotiables for your charity partner. Developing your guiding principles allows you to make smart choices around your charity partners and also positions you well to explain to internal and external partners the choices made.
One of the hardest decisions the foundation committee will make is turning away a worthy cause. On the face of it, you would accept that the vast majority of charities are set up with the best intentions by committed and caring people, and that the work they do in their own space is providing a better life for someone or something. If you allow yourself to say yes based on the need or worthiness of the charity, you'd best have a very, very large pool of money and make very, very small donations, because you will be setting yourself up to support everyone. Of course that is not feasible, but to be able to say yes to a few and no to many you need a set of principles or guidelines, or a decision-making framework.
The guiding principles
Here are some guiding principles you might consider when looking to engage with a charity partner:
Charity must be a deductible gift recipient (DGR)
DGR status is awarded by the Australian Taxation Office and follows a rigorous assessment of the applying charity. Qualifying as a DGR allows donations to be tax deductible and indicates a charity has demonstrated a level of governance and compliance required by the ATO.
If this requirement is accepted by the committee as a prerequisite, it offers a degree of comfort in the charity's operations, past history and reporting to regulatory bodies. Imposing this requirement on the committee can be a double-edged sword, though. While it offers a degree of credibility and guarantees an acceptable track record, it also excludes start-up charities that are often most in need of assistance, as few of them will be DGRs. Often a corporate partner can enter a relationship with a start-up charity, helping in its formation and very much being part of its development, rather than simply donating money to an organisation that's already pretty fixed in its operations.
The obvious benefit to ensuring that charity partners are DGRs is that donations to them are tax deductible. There is a trade-off here between risk tolerance and what change you're hoping to bring about.
Location of the charity
The larger corporates will often apply this filter to ensure that funds raised by the staff and or company remain within the country in which they operate. At Hands the money is directed to the facilities we are building and running offshore; I have encountered this filter quite often, but I have also seen big companies decide they can sometimes make an exception to the general rule. We have benefited to the tune of several hundred thousand dollars in one-off donations from companies who, prior to my keynote presentation, made it clear they couldn't support us, only to turn around an hour later and offer up six-figure donations.
This is a principle I come across often but have never really been able to wrap my head around the logic behind it, other than its use as a filter. We often hear the maxim charity begins at home, but shouldn't we support those in greatest need, regardless of geographical boundaries?
One of the best ways around this is for a company to consider entering charity partnerships at local, national and international levels. I have seen this work effectively. It offers diversity in charity partners, opportunities for engagement and shared experiences, as well as rich relationships and possible cross-pollination.
Access to audited annual financial accounts
Under the Corporations Law companies and other legal entities are required to submit their annual accounts to ASIC. Charities are under no such statutory restrictions.
Access to such accounts, however, allows potential supporters to assess the level of spend the charity makes on the administration of its organisation and the remuneration paid to its staff. Making this an essential guiding principle allows the board to assess the reporting, income and expenditure of the charity and, to an extent, the level of governance and compliance that exists. This condition alone does not dictate the split between funds spent on project and administration costs; it merely requires access to such information.
A number of very large and well-known Australian charities hold their annual accounts close to their chest, which makes them quite hard to access. The question that immediately arises is what are they hiding? It leads you to assume one of two things is occurring. Either they have a large income base with an equally large amount of funds held in reserve, or they feel disclosure of their spend on fundraising, administration or remuneration would put off potential donors.
When the board is considering making an investment using funds that could otherwise be allocated to staff or shareholders, it needs to arrive at a decision with its eyes wide open. If you were entering a financial partnership with another entity and attaching your brand to theirs, would you be happy to do so without access to key information? I suggest that would be highly unlikely. So why risk hitching your horse to a charity wagon whose financial fitness is kept hidden?
Get clear on the charity's business and/or strategic plan
The sophistication of the business and/or strategic plan will depend on the size of the charity. Ideally, the charity you are looking to support will have a clear vision of where it is heading and how it is going to get there. It should be able to articulate its values and what it is looking to achieve over the coming three to five years.
It should also be clear on who it wants to partner with and what conditions it has in place to protect the brand image of those who are signing on to support it. What policy and procedures does the charity have in place to ensure its sponsors are not compromised. The due diligence undertaken by the business looking to partner with the charity will depend on the size of the investment and their proximity.
Percentage of funds spent by a charity partner on administration and fundraising
This guiding principle follows on from the level of transparency that the charity partner offers. Any claims by the charity partner on its level of spend should be supported by independently audited financial records. This is a topic in the charity space that you can argue with virtue on either side of the fence. Dan Pallotta makes a case for charities spending a decent proportion of their funds on administration to ‘grow the pie’ and argues that they actually do a disservice to those they mean to help by not doing so. But there is a generally accepted threshold, and Dan discusses how in the view of his supporters he crossed that line with the result that they withdrew his funding, ending a previously successful campaign that had raised millions of dollars.
The bigger the charity becomes, the harder it is to operate in a manner that relies on volunteers, gifts and the goodwill of the supporters, unless of course the charity can find a model to cover those expenses without spending donors’ money on administration or fundraising.
Operating models and percentages of donations spent on administration are subject to a wide range of variables. The board may choose to apply what it considers an acceptable ratio between the funds reaching the charity's recipients and its expenditure on administration, fundraising and remuneration of its staff. The split may be 80:20 (with 20 per cent spent on administration) or it may be a more flexible 70:30. To cover a unique set of circumstances, a caveat of ‘unless otherwise agreed by the board’ might be attached. Of greater importance than the charity's claim on its spend, I would suggest, is evidence to justify the position, which will be contained in the financial records as outlined in the previous section ‘Access to audited annual financial accounts’.
The charity has in place a sound board of directors
Evidence of a sound board of directors will contribute significantly to the foundation committee's confidence in the operation of the charity. In the assessment of the charity board, the committee may consider the number of directors, the tenure of the board, the frequency of changeover of members and the appropriate skill levels represented.
When a charity is starting out the board is often little more than a collection of friends and colleagues who are committed to the same cause. Many, if not most, of them would never sit on a corporate board drawing remuneration. That is not to say they are not worthy of a position on the charity board, but often their skills and exposure to governance at board level will be limited. As a charity's momentum grows, as the income and projects increase, the charity becomes more attractive to more experienced and desirable directors. Greater caution should then be taken in the assessment of prospective board members, the skill level being commensurate with the size of the organisation.
Holding a position on a charity board is desirable for a number of groups, including those who have the skills and are looking to contribute in the best way they can, and those who lack skills and look to the charity sector to fill the void as they seek paid directorships. Charities should treat the second group with caution when building their board.
When selecting a charity partner, due diligence should include conducting background checks on each of the directors of the charity board to improve your level of confidence in your prospective partners.
Allocation of funds to a specific project
The foundation committee may decide to support measurable and identifiable projects rather than contributing to general operating costs. The benefit of this is it allows the committee to measure and then report on the difference made in a clearer way than with a general donation. This is the model that works so effectively for the Humpty Dumpty Foundation. Its fundraising is targeted towards those looking to have that real, specific outcome attached to their donation.
This principle is difficult to apply to support research-type charities, for which it may be a ‘nice to have’ rather than an essential.
Opportunity to engage with the charity partner
In considering charity partners, the foundation committee may seek first to identify opportunities for members of the business to share in experiences and deepen their level of engagement, thus providing ongoing and mutual benefits. Part of the initial assessment may be to consider the mutual flow of benefits, which shouldn't be seen as flowing in one direction only.
Some charities build their events around participation, which serves to raise funds and increase awareness of their work. Others prefer to have skilled specialists perform the roles and limit engagement to fundraising. Again, the importance of this principle will depend on the desired relationship and outcomes and the values of both organisations.
Term of commitment/review
There is a standard formula for developing deep and meaningful relationships of this nature: support fewer over a longer period of time to maximise the return to all parties. It's hard to build strong relationships if the support is spread across too many charity partners. The messages can become confused or lost in the noise generated and the effectiveness is often diluted. Stability, and building on the shared strategy, offers benefits to both parties.
Committing to fewer for longer doesn't remove the need for frequent review and assessment of the relationship, however. It may be that the committee decides on a one- to two-year commitment that is reviewed annually. Or, should the relationship be mutually beneficial, the commitment may be open-ended but subject to review and assessment on the anniversary of the agreement.
Reporting back on KPIs
The committee may consider it prudent to establish a number of key performance indicators for the relationship with its charity partner and request that those KPIs are reported on annually or over another agreed time period.
These indicators may include how the funds were allocated, the change that was achieved, the number of interactions and the shared experiences. Measuring the change achieved in the charity sector can involve both soft and hard returns. Enriching the lives of sick children, making them laugh for a couple of hours — how do you measure the true worth of that? But where results are measurable, this can be hugely effective in reporting. OzHarvest does this very well. For every dollar donated, two meals can be provided to those in need. The beauty is in the simplicity.
The next step
These guiding principles will help shape the decision-making process around what charities will be considered the right fit for a business. In my experience of stepping into businesses to help them implement a CSR platform, few don't have a good idea of the charity partners they would like to work with. Often they have their charity of choice but want to formalise their relationship. Establishing a set of guiding principles helps the committee clarify what it is looking for in its charity partners, then it helps in communicating both internally and externally why a particular charity has been chosen.
The guiding principles will help you decide on the type of charity you are looking for and the minimum operating standards they should have, but there are a number of steps to consider beyond this. It's about the alignment of values. The guiding principles can help shape a somewhat clinical view — measures you can readily audit, similar to looking at the company's financial accounts. They will give you a picture but not the full picture. You really want to find out what its soul is like. Is it an organisation that meets your values? Is it a group of people you not only want to do business with but feel will enrich you and your team?
Consider the following:
- Pilot program. Before committing to a particular group for the longer term, start the relationship with a pilot program that will allow each of you to see how the other works.
- Commitments. Does it live up to the commitments it has made? With the best intentions it may have begun with a lot of promises. But for most the CSR partnership is not core business, and priorities can shift. As those priorities shift is the relationship still in line with what was promised?
- Accessibility. How accessible are the key partners of each organisation after the initial wave of excitement has passed? Have the deckchairs been moved and is that acceptable?
- Quantity vs quality. How many charity partners does the business have and how many business partners does the charity have? It's important to learn early on where you stand, what you can expect and what is the growth strategy of each stakeholder. Is the charity constantly looking to land the next business partner and if so how does that affect your relationship? It might be perfectly acceptable or it might not, but it's good to be clear about this early on.
When talking about CSR a relatively new corporate to enter the space is REA Group, which operates Australia's leading online property site realestate.com.au. Its engagement with the community is not new — it has been doing that quite successfully through its sponsorship of community initiatives and education of real estate agents. What is new, though, is its commitment to a CSR platform underpinned by the concept of shared value.
REA Group owns and operates the leading real estate and commercial property advertising sites in Australia. Its primary customers are real estate agents who sell or rent properties. It operates internationally in addition to within Australia, with a presence across Europe and Asia, and its websites are visited by over 11 million unique browsers each month. To make all this happen it employs more than 700 staff across its business and is an ASX-listed company. So while the general public might know its real estate websites, clearly it is much more than that.
REA Group's engagement strategy with the community sector crosses three areas: sponsorship of community events, which is part of its marketing platform, the education of real estate agents, and its CSR platform.
Its decision to enter the traditional CSR space was made in a quite untraditional way that was more akin to the strategic direction we are seeing from those leading in this area. Its approach is not one of corporate philanthropy but one of addressing a problem through innovation and a longer term, more strategic approach.
REA Group is in the main about providing technology to help people sell and buy their homes. Our home is where we retreat at the end of a busy day; it is where we build and nurture our families, a place of safety. Well, that's what it should be. The rates of domestic violence and the homelessness that results have reached alarming levels and continue to rise within Australia, as they have been doing since 2006. When looking to set its CSR direction, REA Group wanted to do something that aligned with its industry and values, and to introduce into the sector innovation that charity groups just would not get near otherwise.
Its early work in the space is looking towards alignment with national bodies who are working at the prevention stage rather than just the intervention stage. It is looking to partner with those groups who are addressing the deeper problem rather than just the impacts of violence and homelessness, and to this end its strategy is providing longer term support across a smaller number of external partners.
Its approach of ‘fewer for longer’ has been a consistent theme through this book among companies who are making the most impact. Jill Riseley, who oversees sustainability for REA Group, says, ‘Our commitment to our partners will initially be over a three-year period with an option to extend after that. We recognise that the area we are choosing to operate in it can take several years to bring about change, but we are committed to the cause and for the long term’.
REA Group has established a number of conditions for selection of charity partners. Some are limiting, some dramatically reducing their options when it comes to charity partners, but it is committed to work with a coalition of partners to bring about the most effective change it can contribute. By working with multiple stakeholders it sees an opportunity in the multiplier effect, building capacity within the partners it works with. The key requirements of its program are as follows:
- alignment with the company purpose and values
- alignment to business strategy and operational impacts
- create a measurable and tangible societal difference
- enable the ability to provide a mix of financial, expertise and product
- a measurable return to the Group through the engagement and advocacy of its staff, customers and consumers.
In heading up the Sustainability program Jill Riseley has no doubt what REA expects. ‘I see the work that we are doing in this space as equal to that of an investment area of the business, not too dissimilar from that of an investment banker. My role is to invest the resources of REA and earn them a return on that investment. It's not about giving back; it's not about presenting cheques, it's about making a sustained and significant difference in the area we choose to focus on, with a return to REA Group by creating tangible societal outcomes.’
Jill believes that it is both fair and equitable that the sustainability area of the business should be held to account, and that ‘most organisations don't hold their community investment teams to the level of accountability they should, and by not holding them to account they are doing not only their teams but the entire industry a disservice’.
Here are the key lessons we can take from REA Group's approach:
- Commit to fewer for longer.
- Take a strategic approach, ensuring alignment between your purpose and values.
- Leverage the resources within the company to make the biggest difference in the charity sector.
- Make sustainability teams accountable for bringing a return to the business.
Sharing the pie
How many ways are you going to cut the pie, and who gets a slice?
Once you have decided on the types of charities you want to support, how do you decide on the number? For some, one will be the right number; others will find many is the right fit. Unilever Global, representing 173 000 employees, has five major charity partners. Churchill Education, with just 30 staff, supports six major charity partners and a number of smaller ones. Each organisation has found a model that is working for them right now.
A major consideration is the type of relationship and level of engagement you want. If your chosen model is currently one of corporate philanthropy without expectation of return, then perhaps you are happy to have more than one charity on board. If you are looking for deeper engagement, the model adopted by Jellis Craig, with two major charity partners, allows for that. For Kay Spencer, CEO and chair of Narta, selecting Hands Across the Water as its sole charity partner has allowed it to build a much deeper relationship and engagement.
Larger corporates have the option of operating like a foundation, inviting grant applications or supporting many projects aligned to a major theme within their overall CSR platform. Optus and Origin, whose core CSR tenets are vulnerable youth and education respectively, encourage their staff and external stakeholders to support a wide range of charities on more personal levels.
The key questions to ask when selecting the number of charity partners you wish to work with include the following:
- What level of engagement are you seeking?
- Is your support financial or in-kind?
- What are you seeking to gain from the relationship?
- How much time are you prepared to commit to the relationship?
- Is it part of your long-term strategy?
People can become quite passionate about a cause that is close to their heart. Understandably, someone who loses a parent at a young age to cancer or loses a child to a rare condition will see their cause as of the utmost importance. A traveller who returns from China after seeing bears held in cages for the extraction of their bile may want to channel their resources into eliminating that cruel practice. We can't help everyone, but with clarity we can all help someone.
Setting parameters for who or what will be supported, and the term of that support, allows you as a business to articulate your position clearly to those looking for your support.