Chapter 9. Community Relations and Strategic Philanthropy. Chapter Objectives. To describe the community as a stakeholder To discuss the community relations function To distinguish between strategic philanthropy and cause-related marketing To identify the benefits of strategic philanthropy
Chapter Objectives To describe the community as a stakeholder To discuss the community relations function To distinguish between strategic philanthropy and cause-related marketing To identify the benefits of strategic philanthropy To explain the key factors in implementing strategic philanthropy
Community Stakeholders A community includes those members of society who are aware of, concerned about,or in some way affected by the operations and output of the organization. A community is also referred to a company’s area of local business influence.
Community Stakeholders (cont.) Issues of concern to the community include: Pollution of the environment. Land use. Economic advantages to the region. Discrimination. Exploitation of workers and consumers. Neighbor of choice An organization that builds andsustains trust within the community.
Community Stakeholders (cont.) When are firms considered a neighbour of choice?
Shell Malaysia co-sponsored the annual traditional song and dance festival for secondary schools in Miri and Bintulu Division since 2000. YTL Corp sponsored “Tunku – The Musical” at the Kuala Lumpur Performing Arts Centre (KLPac) from 12–15 September 2007 with free tickets given out to the public for all performances.
How can organizations become neighbour of choice?
DewanFilharmonikPetronas (DFP) and Malaysian Philharmonic Orchestra formed ENCOUNTER, an Education Outreach Programme for music appreciation and community outreach activities in schools, hospitals and orphanages.
IOI Student Adoption Programme aims to provide financial assistance on educational needs to underprivileged children. CIMB provided capital equipment to a group of 18 single mothers in Pulau Tuba, off the island of Langkawi to organise themselves as entrepreneurs. These single women’s social welfare has improved tremendously since their monthly income rose from a mere RM150 per month per person to an average of RM600 per person per month since the upgrade of their facilities and equipment.
Community Stakeholders (cont.) The relationship between a business and the community should be symbiotic.
Community Relations (1/3) Refers to the organizational function dedicated to building and maintaining relationships andtrust with the community. Often supports local community through philanthropic activities. More strategic significance within the organization. Develops community mission statements to identify the needs of the people relative to the organization’s competence.
Community Relations (2/3) Because community needs and concerns change, the organization will need to adapt its community relations efforts. A company may need to conduct a community needs assessment to determine key areas in the community that require support and to refine the company’s community mission. ( refer Table 9.2)
Common Myths about Community Relations (Table 9.3) No local government/community consent is necessary. Talking to the community will create trouble. One-way communications efforts are sufficient to improve community relations. Implementation is easier without community relations. The community cannot add anything meaningful to this process because it is too technically complex. Community leaders will request costly or unreasonable solutions.
Responsibilities to the Community Economic issues Legal issues Ethical issues Philanthropic issues
Economic Issues Business is vital to the community. Buyer-seller interaction stimulates the economy. A new company not only brings jobs but also new technology, related businesses, improvements to infrastructure, and other positive factors. Interactions with suppliers and other vendors also stimulate the economy. Companies buy supplies, raw materials, utilities, advertising services, and other local goods and services.
Economic Issues There is often a contagion effect when one business moves into an area. A business can also cause financial repercussions when it exits a particular market or geographic location. A company’s departure or retrenchment from a community can be devastating to the local economy. Downsizing Plant closings
Legal Issues (1/2) A company must operate within legal and regulatory parameters. Companies are granted a license to operate. Many mega-retailers have facedrejection because people believethey threaten small “mom & pop”businesses.
Legal Issues (2/2) Sometimes communities can oppose the setting-up of businesses in a particular area. They can reject a business if the presence of the company will create too much traffic, pollution or negative social activities. Communities can exercise their voice in determining whether a company will or will not be welcomed (e.g. through coercive power). In exchange for the license to operate, organizations are expected to uphold all legal obligations and standards.
Ethical Issues Companies are viewing themselves as citizens of the community. Companies may evaluate the role and impact of their decisions on communities from an ethical perspective. Business leaders are taking greater responsibility for determining how they can assist in improving communities. Supporting education. Assisting in the development of mass transit. Supporting environmental initiatives.
Earth Hour (8:30pm to 9:30pm on 28 March 2009) . IOI’s local and international were involved via various ways such as cut down on electricity consumption, safety campaigns, creative contests, e-mail blasts and more to save the Earth.
Philanthropic Issues Historically this has meant providingsupport for worthy causes. Gifts Grants Other resources Volunteer programs Employees donate time in support of social causes (volunteerism). Communities benefit from the application of new skills and initiative toward problems, and companies develop better community relations.
Volunteerism Painting at Selangor Cheshire Home by HSBC’s Deputy Chairman & CEO and volunteers
Philanthropic Contributions Philanthropy- provides four major benefitsto society. Improves the quality of life and helps make communities places where people want to do business, raise families, and enjoy life. Reduces government involvement by providing assistance to stakeholders Develops employee leadership skills. Helps create an ethical culture and the valuescan act as a buffer to organizational misconduct.
Strategic Philanthropy (1/2) Refers to the synergistic use of an organization’s core competencies and resources to address key stakeholders’ interests and to achieve both organizational and social benefits. Goes beyond traditional benevolent philanthropy. Involves both financial and non-financialcontributions to stakeholders. Involves employees, organizationalresources, and expertise.
Examples of Corporate Philanthropy
- Nestle’s collaboration with farmers in Serkin, Sarawak who plant traditional red rice, a key ingredient for the Nestle infant cereal is an example of strategic philanthropy that strengthens related sectors of the economy and which also benefits the company.
Strategic Philanthropyand Social Responsibility Companies often consider philanthropy only after meeting financial, legal, and ethical obligations. The traditional approach to corporate philanthropy is characterized by donations and related activities that are not purposefully aligned with the strategic goals and resources of the firm. In the social responsibility model that we propose, philanthropy should be considered and aligned not only with corporate strategy, but also with financial, legal, and ethical obligations. Strategic philanthropy should be viewed as an investment that is tied to business strategies and implementation.
Cause-Related Marketing An organization’s products are tied directly to a social concern. E.g: Estee Lauder/Bobbi Brown/Clinique and Pink Ribbon Campaign 2008 Percentage of sales are usually donated to a cause appealing to a relevant target market. Overall goal is to increase product sales for a defined periodof time. Charity partners often assist in promoting the alliance(e.g., Habitat for Humanity partnered with Home Depot)
Pink lip items from Bobbi Brown’s and Estee Lauder from which a portion of proceeds will be donated towards the Breast Cancer Research Foundation.
Stakeholders in Strategic Philanthropy Customers Employees Business Partners Community and Society Environment
Employees as Stakeholders Key concern of most organizations isattracting, socializing, and retaining competent and qualified employees. Strategic philanthropy initiatives give companies the opportunity to increase: Employee commitment. Employee motivation.
Customers as Stakeholders As competition increases, companies constantly seek to differentiate themselves in consumers’ minds. Strategic alignments with social causes of interest to customers can help to create differentiation.
Business Partners as Stakeholders More companies are using philanthropic goals and social concerns as way to ascertain with whom they would like to do business. Companies are increasingly asking business partners for: Social audits of their companies. Adoption of industry codes of ethics. Socially responsible actions in their business practices.
Community andSociety as Stakeholders Society expects businesses to be good corporate citizens and to contribute to the well-being of society. Groups of companies and industry associations are working to extend the philanthropic efforts of their member companies.
Natural Environment as a Stakeholder Environmental causes are of interest to all stakeholders. Environmental abuses have damaged company and industry reputations and resulted in lost sales.
Benefits of Strategic Philanthropy Tax-deductible contributions for corporate giving. In Malaysia, tax deduction is 10% for a company’s contribution to charitable purposes. Employees can develop a stronger sense of loyalty and commitment to their employer. Customer loyalty can increase as consumers see the synergy between a company’s core competencies and social causes. Overall reputation in the community can beenhanced and government and communityrelations can be strengthened.
Implementation ofStrategic Philanthropy Must have the endorsement and support of the CEO and other members of top management. Top-level support allows organizational members and stakeholders to see the importance of the program to the company. Companies need to find their unique method and not clone what competitors are doing. Positioning in consumers’ minds.
Planning andEvaluating Strategic Philanthropy (1/2) Research Should cover a company’s internal organization and programs, potential partnering organizations, sponsorship options, and events that might intersect with the interests and competencies of the organization. Organize and design Classifies research information according to level of need and alignment with organizational competencies. Engage Engage top management early to make the approval process easier in the future. Spend Decide where to invest resources.
Planning andEvaluating Strategic Philanthropy (2/2) Evaluating corporate philanthropy should begin with a clear understanding of how these efforts are linked to the company’s vision, mission, and resources. Methods used to evaluate strategic philanthropy should include an assessment of how these initiatives are communicated to stakeholders. Donors are becoming increasingly concerned about accountability and results in regard to the charities to which they provide funding.