Measuring Return on Investment: The Value of Nonprofit Partners
Philanthropy headlines and annual studies say it is true: companies that integrate corporate social responsibility (CSR) programs into their overall business strategy are hailed as good corporate citizens. Companies with strong CSR programs often have significant brand strength and a loyal consumer base. However, the verdict is still out on how best to demonstrate the social impact of the millions of dollars invested annually in charitable causes, through cash contributions, employee volunteerism programs, in-kind donations, or sponsorships.
Measuring the value and benefits of good corporate citizenship is nothing like demonstrating the return on investment (ROI) of a media spot during the National Football League’s playoff games. Public relations and communication teams track financial performance through indicators such as changes in sales and share value. There is no simple method for quantifying the “added value” that philanthropic activities provide towards distinguishing or improving a company’s competitive advantage.
No perfect science exists for measuring social impact, unless the company is willing to invest significant dollars on a formal evaluation, which could take years to complete and assess. And even with this effort, the company will still have a difficult time measuring all of its social impact. So, how can corporate community involvement and philanthropy programs communicate to key internal and external stakeholders that beyond good corporate citizenship, investing resources in a strategic partnership with a nonprofit organization is a worthwhile effort?
One approach is to measure success based on the depth of the relationships that a company has with key nonprofit partners. A strategic partnership is often defined by a multi-year commitment with large grants, the use of other corporate assets such as product donations or volunteer time, and a greater investment of time collaborating with the nonprofit to ensure successful execution of the funded program.
There are a variety of indicators that corporate philanthropy staff can use to help make the case that strategic partnerships are mutually beneficial, not only to the charitable organization, but to the company itself.
Roadmap to Tracking ROI
1. Outline the specific outcomes and overall impact the company desires to achieve through its corporate foundation program. Using this information as a guide, select key nonprofit organizations to serve as the company’s primary partners. Not only will the company avoid using its limited resources on misaligned programs, but it can also work closely with the grantee to target its efforts towards achieving the desired short- and long-term outcomes. A company doesn’t want to reshape the grantee’s program, but it might be able to offer resources that can support the grantee’s interest in expanding the types of services offered.
2. Apply a more vigorous assessment to the donations provided (in-kind or cash). Most grants can generally be satisfied with a report on outputs, best defined as the number of units of service provided as a result of implementing the program. For example, outputs might include the number of counseling sessions offered for domestic violence victims, the number of home-delivered meals served to low-income seniors, or the number of youth who attended summer camp. These results are very tangible because they can be counted and should be presented as part of a final report from the grantee. It is much harder to determine if the domestic violence victim feels more empowered as a result of an intervention program or if the student actually experienced an increase in self-esteem after his or her participation in camp.
In order to capture this type of social impact, the foundation will likely need to help the grantee improve its evaluation capacity, or hire an expert to help develop the assessment tools and provide guidance on the types of data to be collected in order to demonstrate results. Again, the assessment should focus on the outcomes that the nonprofit has agreed to help the foundation achieve, based on its expertise in a specific focus area. When establishing the partnership, the nonprofit should articulate clearly how it will measure results and how often the information will be shared with the donor. Together, foundation staff and representatives from the nonprofit should review the results and discuss how the program could be enhanced to achieve greater results. It is important to celebrate even subtle results that demonstrate the nonprofit is moving the needle on the desired outcome and to reflect on new objectives and goals for the program in the future.
3. Assess how well the company has leveraged all of its assets to strengthen the stability and vitality of the nonprofit partner. Credible nonprofits have likely been successful because of their expertise in a particular focus area. Sometimes, this could mean that the organization lacks skills and expertise in other areas that are important to its growth and development. Often times, the nonprofit could benefit from assistance in the development of its organizational capacity (e.g., leadership transition, data processing, board development, etc.).
It has become more common for companies to support the nonprofit in building its skills and/or expertise in these areas. Communications staff might be lent to the nonprofit to help with a re-branding project, or a senior manager from human resources may provide some guidance on how to improve recruitment activities. Support may also be as simple as upgrading the partner’s technology capacity through the donation of computers and new software. A company should take a look at its core competencies and products in order to share this expertise with its nonprofit partner, where appropriate. This will deepen the grantmaking relationship and strengthen the nonprofit’s long-term stability.
4. Pause to measure the relationship between consumer loyalty and the company’s philanthropic programs. Companies regularly invest resources in studying their consumers’ behavior to understand shifts in purchasing habits, to introduce new products, and to measure consumers’ perception of the company overall. Why not ask about the company to measure the level of awareness that current and potential consumers have regarding its corporate citizenship? Consumer perceptions should be mapped to awareness of the company’s overall strategy and specifically to its relationship with key nonprofits.
5. Ask employees whether the company’s philanthropic programs influenced their decision to work for the company. More and more, potential employees include philanthropy in their evaluation of a prospective employer. Employees want to be engaged in the company’s philanthropic initiatives, and there are many different ways to meet this interest. Employees are motivated to serve and give when they are confident that the company is also giving back in a meaningful way. A good practice is to randomly survey new employees during heavy recruitment seasons to determine if the company’s philanthropy had any bearing on the individual’s choice to accept employment. In addition, a corporation may choose to dedicate a day of service to a nonprofit partner, or to coordinate specific volunteer opportunities for employees that target professional development needs.
6. Track the number of media hits and periodical references generated from an external source. Nonprofit partners, advocacy organizations, and other philanthropic think-tanks are the best advocates for a company’s philanthropic efforts. When the story of a corporate success in philanthropy is profiled in a grantmaking periodical, or through a press release pushed by the nonprofit, the credibility of the message is improved because someone else is spreading the good news. Of course, it is important for the company to share its story as well, but do not underestimate how much a nonprofit can enhance the corporation’s image in the marketplace. Corporate partners are often highlighted in annual reports, on websites, and during annual events, yielding a more objective review of their good works.
7. Find opportunities to share broadly what the company has learned through its commitment to a strategic platform. Annual conferences, workshops, and symposia in the field are built on exchanging information and ideas with other philanthropy practitioners. The staff of corporate foundations covet the chance to learn what has made their peers successful in grantmaking. The cross-fertilization of new approaches to philanthropy and community involvement extends the donor’s impact beyond its individual effort to a more collective impact. In addition, the nonprofit partner can also serve as a leader among its peers, sharing what it has learned through the partnership, helping to improve the service delivery of similar organizations.
8. Determine if there has been any application of lessons learned from the corporate foundation’s philanthropic efforts to the company’s policies or practices. A direct relationship likely exists between supporting a fellowship program for environmental scientists and the sustainability practices utilized by a company in manufacturing. It is more difficult to tie the work of a youth organization to the way a multi-million dollar corporation operates, yet there is value in discussing what the nonprofit has given to the company throughout the partnership. It also doesn’t hurt to explore what employees have taken from their interaction with a nonprofit partner during a volunteer experience or agency tour.
9. Leverage relationships with other industry partners to achieve scale and greater impact. Many companies share common philanthropic interests and goals but rarely seek out opportunities to work together to achieve long-term impact. The truth is no corporation will ever be able to solve a large social concern in isolation. Collaborating with other companies and/or governmental agencies brings a larger number of resources and expertise to the partnership that can decrease the nonprofit’s dependency on a single source, but also create opportunities for the primary donor to pursue new relationships. The nonprofit can track how the initial investment has yielded additional resources and share the information in a final report. The multiplying factor of pooled resources is critical to achieving lasting impact.
Taken together, the indicators shared are a starting point for how to value a company’s ROI through strategic partnerships.
In the coming weeks, onPhilanthropy will feature a case study that demonstrates specific application of the roadmap outlined in the article.