By David Lawlor
Business 2.0
March 30, 2001

Brand Aid
Despite an economic slump, experts say corporate philanthropy remains essential to branding. Companies such as HP make it work through advance planning.

As the legend goes, Hewlett-Packard (HWP, info) started its business out of a Silicon Valley garage in 1939 with a mere $538 backing the venture. Perhaps the less well-known portion of the tale is the fact that the company gave $5 to the Salvation Army that same year. That donation, paltry as it may seem today, established a foundation for what became a principal HP value--philanthropy.

But in 2001, giving money away is not at the top of most corporate priority lists. After years of promising performance, dot-com and high-tech companies are now expected to prove good on their word. Couple that demand with a sluggish economy and the idea of philanthropy begins sounding more than a little counterproductive. Give money away? Doesn't that kind of defeat the purpose of cost-cutting?

Well, maybe not.

Complementing advertising and public relations efforts, philanthropy serves as a key way to create a positive corporate image. Even if a company has slashed advertising and PR budgets, cutting corporate giving entirely may backfire.

"It [philanthropy] has a huge impact on branding," says Kendall Webb, CEO and founder of JustGive.org, a nonprofit charity portal for businesses and individuals. "I don't think companies give for that specific reason only, but the payoff is there. Consumers are looking for more meaning in the products they're buying and they really buy into an idea like corporate giving."

Corporate giving can also foster employee satisfaction in tough times. "It [philanthropy] is an important way Microsoft (MSFT, info) contributes to the community," says Bruce Brooks, director of community affairs for Microsoft. "I think it really gives people some sense of a greater purpose."

Some skeptics might find little substance in Brooks's claim, but Webb says she believes companies do see a payoff.

"These are the communities they [the companies] have employees living in and these are the communities their customers are living in," she says. "It makes business sense to invest in your employees and customers through giving."

But managing to give, considering the profit pressures and the unstable economy, can be difficult. HP, for one, has devised a plan to keep philanthropy a part of the company's routine.

"We do strategic planning to make sure we can continue with our charitable contributions," says Bess Stephens, director of philanthropy and education for HP. "When times are good we set aside extra money, so when things get bad we can continue to give the same amount."

HP's strategy is working. In fiscal year 2000, the company contributed $52 million in cash and equipment to nonprofit agencies and educational institutions globally. The company expects to give approximately the same amount in 2001, Stephens says. HP has contributed more than $1 billion in cash and equipment to schools and other nonprofits around the world over the last 20 years.

Microsoft has adopted a similar mantra of making philanthropy a planned part of the company's budget. During fiscal year 2000, Microsoft gave $34.3 million in cash and $200 million in software to more than 5,000 nonprofits. The company says its contributions will not decrease in fiscal year 2001. Companies have also begun utilizing Websites where employees can give online.

Online giving tools make it simpler and faster for employees to contribute, Webb says. Charitable groups agree.

"This year alone, online giving [at the United Way's Silicon Valley chapter] has doubled from 24 percent last year to 50 percent this year," says Greg Larson, president and CEO of the United Way Silicon Valley chapter. Many young businesses have yet to realize the potential philanthropy represents, says Michael Wyland, COO of CharityChannel.com, an online community for nonprofit professionals.

"Some new companies who have come in to money have no tradition of giving," Wyland says. "Or some corporations are very young and they may not place much value in giving." In 1999, more than $190 billion was contributed to philanthropic concerns in the United States.

Corporations generated a mere $11 billion, or just over 5 percent, of that total, according to the American Association of Fundraising Counsel. On the other hand, individuals gave $143 billion, or approximately 75 percent, of the total.

Those numbers are a bit disheartening, Webb says. "It's [philanthropy] not as integrated a part of the corporate culture yet," Webb says. "Right now it's not a high priority for companies because they have yet to realize the huge benefits it can generate. But when they [companies] see what it can do for them, I think they will be quick to join in."

The Newman's Own line of food items, perhaps best known for spaghetti sauces, is an example of a successful business venture based on philanthropic principles, Webb says. Actor Paul Newman, who founded the company in 1982, has donated $100 million to organizations around the world since the company's inception.

People are more likely to purchase a product like Newman's than a competitor's if they know their money will go to help others, Webb believes. "This makes philanthropy just a huge, huge part of helping your brand," Webb says. "I hope that people like Newman set an example and encourage others to contribute too."

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