Minnesota Companies Strive to Increase the Impact of Their Grantmaking

When the Toro Company took an in-depth look at its overall grantmaking activity last year, it came up with a surprising discovery. Although Toro's key strategic objective is to be known as an environmental company, "not as much of our grantmaking dollars were going to environmental programs as we thought," says Don St. Dennis, president of the Toro Foundation. In fact, a growing number of dollars were going to health and human services, especially through the company's United Way campaign. That discovery prompted Toro to restructure its grantmaking operations and guidelines to concentrate much more of its giving on environment-related charitable causes. "It's an effort to leverage what we're doing and be more focused on our companywide strategic goals," St. Dennis says.

Like Toro, many other corporate grantmakers in Minnesota are striving to more closely align their grantmaking strategies with their overall business strategies, according to recent discussions Giving Forum held with several corporate grantmaking executives in the state. Although this is a trend that has been going on for several years now, if anything it seems to have intensified since Giving Forum last held similar discussions with corporate grantmakers three year ago (view that 1995 article). As companies look to be good corporate citizens while staying profitable in the global marketplace, they are using everything from marketing tie-ins to employee volunteerism to get the most bang for every philanthropic buck.

Giving More Strategically

Minnesota's corporate grantmakers appear to be giving more dollars than ever before. According to estimates from the Minnesota Council on Foundations, corporate contributions in the state grew more than 90 percent between 1987 and 1996 to more than $193 million. This year the Minnesota Keystone Program has recognized 252 companies in the state for contributing between 2 and 5 percent of their pre-tax earnings for charitable purposes, up from 184 companies in 1994.

This increase in grantmaking funds adds yet another motivation for companies to spend the dollars as wisely and strategically as possible. Like Toro, many companies are giving in ways that are more clearly linked to their products and services. A key funding priority for TCF Bank, for example, is housing and economic development, since the majority of its loan portfolio addresses these areas. At Edina Realty, a company that helps people find homes, its foundation focuses on supporting housing and homeless-related charities.

Creating stronger links to the business can also influence a corporate grantmaker's geographic focus. At Cargill, an international company whose core business is agricultural products, the company is directing more of its grants to rural communities where it has a presence. "We have a limited amount of money, and can't be all things to all people." says Jim Hield, executive director of the Cargill Foundation. "So we have to ask ourselves where we think we can really make a difference, both in terms of the issues we want to address and where."

While some companies are tailoring their giving more directly to their products and market niches, others are taking a broader approach by linking their grantmaking more closely with their overall business strategies.

The St. Paul Companies, for example, ties its community giving to its strategic objective to be a good long-term investment for its shareholders, concentrating many of its grants on building and improving the long-term viability of the nonprofit sector. Towards that end, the company has provided ongoing operating support to community development corporations in St. Paul for the past 25 years. "Some people would look at that as a bunch of little grants which don't have any real focus," says Mary Pickard, community affairs officer for The St. Paul Companies. "But we view it as a long-term strategy for supporting a group of organizations that collectively have an important long-term impact on the community."

The St. Paul Companies has also refined its corporate giving program to reflect the company's strategic commitment to diversity. The community affairs department diversifies its grantmaking team, for example, by bringing in consultants and staff outside the department who offer diverse perspectives in terms of race, gender, sexual orientation, geography and expertise.

Some corporate grantmakers are taking steps to give more focus to their grantmaking not by changing their funding priorities and guidelines but by tightening up what is already there. Chris Park, director of the Dayton Hudson Foundation, says her organization has "pared the edges" of its grantmaking in recent years in order to be more strategic in its key focus areas. She says the foundation took a sharp lens to its past grants and decided to discontinue some funding - slowly, over several years - for some partners where "somebody loved the programs a long time ago and we had made reasons why they continued to fit our guidelines, when the reality was that they didn't fit our current core focus areas very well. This allowed us to add new partners whose activities were a good fit."

For some companies, becoming more focused in their grantmaking has involved more dramatic steps. Although Pentair has been an active grantmaker in Minnesota for many years, after an extensive analysis the company overhauled its entire grantmaking program last year, establishing a new foundation (see side story below) with a new mission and guidelines. "Under our old guidelines, anyone could have applied and would have fit," says Jeanne Benson, manager of The Pentair Foundation. "We needed to become much more focused." The foundation decided, for example, to change its education funding focus from higher education to K-12, since work-readiness is an important issue for the organization.

Centralized vs. Decentralized

In refining its grantmaking focus, The Pentair Foundation faced an issue that many corporate grantmakers are dealing with today: how much of a company's grantmaking decisions and operations should be handled from its corporate headquarters versus its branches, plants or retail stores? Moving grantmaking decisions out to the field is often seen as a way to get more employees involved in the giving process, as well as to give the program more local input and visibility.

Although the trend has been for companies to decentralize their grantmaking, Pentair decided to take the opposite route and consolidate some aspects of its grantmaking program. Several other companies say they've followed a similar centralization route in recent years.

Pentair's local operating units still make grant recommendations out in the field as they have in the past. But in a change from previous practices, the company's operating units are now required to follow a central set of guidelines, and to funnel all recommendations through a formal employee committee. "We felt that it was important that we all get on board in terms of our philanthropic giving," says Benson. "There's now a lot more cohesiveness throughout the company."

Many local corporations still see a value in moving at least some portion of their grantmaking out to the field. Land O'Lakes, TCF and The St. Paul Companies are among the companies who give their field offices small annual grant allotments to award as they wish in the local area, while making larger grants through the corporate headquarters. Dayton Hudson has gone even further recently with the arts grantmaking program for Target Stores, moving all the decision-making responsibility for the program from its Minneapolis headquarters out to its district offices around the country.

But administering decentralized grantmaking is no small undertaking. Training employees to be effective grantmakers is a key challenge, particularly when it is something they are doing in addition to their full-time jobs. Last year The St. Paul Companies hired a staff person dedicated to providing education support to its 15 employee contributions committees around the country, and recently held a three-day training and development session for its committee chairs.

Finding and developing good employee grantmakers can be particularly challenging in a retail environment such as Dayton Hudson, where employee movement and turnover is high. "You're constantly working on training," says Park. "We're always balancing how to make sure our program remains high quality by utilizing our field locations, while providing the kind of infrastructure and support they need to be good at it."

Decentralizing your company's grantmaking program becomes even more challenging as you try to extend it beyond the U.S. border to other countries - something a growing number of Minnesota companies are doing or considering. Aside from the challenges brought about by the physical distance, a company's culture and operations may vary considerably from country to country, as may the charitable tax laws and the general concept of corporate philanthropy. "If you want to do good grantmaking you have to understand the environment," says Pickard, "and when doing international grantmaking there are cultural differences that require a certain amount of adaptation and understanding on our part, and that takes a while."

Philanthropy as "Branding"

Perhaps one of the most visible trends in corporate grantmaking in recent years has been the effort by many companies to more closely link their community involvement and marketing efforts — particularly as it relates to enhancing their brand image, or "branding." "We use philanthropy as a way to build relationships with customers more than to sell products," says Toro's St. Dennis. "It goes beyond your products. Corporate giving can enhance the best part of your family name."

For Dayton Hudson Foundation's Park, branding means "fitting our giving and community involvement to who we are as a company; to our corporate values, culture and persona; to who shops in our stores; to who works in our stores... What do they care about? What will touch them?"

ReliaStar uses its corporate philanthropy to help raise awareness of its "education brand," says Terry Egge, executive director of the ReliaStar Foundation, referring to ReliaStar's strategic objective to be known by consumers as a company that can educate them on their financial options. Earlier this year the company established the $100,000 ReliaStar Fund at the Minnesota Women's Foundation to support innovative economic education programs for low- and middle-income women and girls throughout Minnesota. The company has also created an employee volunteer tutoring program for 8th graders, and limits its sponsorships primarily to education events at the University of Minnesota. "We use our community tools to enhance our name recognition and brand awareness efforts," says Egge, "so that when people think of ReliaStar they think of the financial education company."

Some companies have made major organizational changes in order to bring their community affairs and marketing functions closer together. In the past year ReliaStar moved its community relations function from the communications department into marketing, and Toro has brought its public relations and foundation functions under the same organizational umbrella.

At Dayton Hudson, Minnesota's largest corporate grantmaker, Park says there has been "huge movement" in the past few years to improve cooperation and collaboration between the company's marketing and community affairs functions. The company has accomplished this not through departmental changes but with stepped-up communication efforts.

Although Dayton Hudson has had success in bringing these functions closer together, Park says it has taken a lot of work from all sides. She notes that people involved in community relations tend to be more process-oriented than marketing folks, who are much more results-driven. "What makes it a very rich relationship is the balancing of those two," she says. "It's a give-and-take partnership that's win-win."

It should be noted that not all corporate grantmakers are creating stronger links with marketing. Some, in fact, are intentionally keeping their distance. "That's not a major thrust of ours," says Peter Bell, executive vice president of corporate community relations for TCF. "I don't want to give to a zoo, for example, because the marketing department wants to do a campaign around gorillas."

Leveraging Cash Contributions

In their search for innovative ways to leverage every giving dollar, corporate grantmakers appear to be continuing a trend to more tightly integrate their employee volunteer efforts and in-kind contributions with their grantmaking activities as a key way to add more value to the grants they make. What's more, people who volunteer make better employees, according to a recent survey of Pillsbury employee volunteers (see side story below). Companies like Pillsbury, Honeywell and General Mills have been national leaders for many years in organizing and leveraging employee and retiree volunteer efforts, and a growing number of their corporate colleagues are following suit.

Since many of The St. Paul Companies' grants in its field locations are relatively small, the company has created a philosophy that volunteer involvement must be a part of these grants so that they can have a greater impact for both employees and the community. At Cargill, the company's grants to Habitat for Humanity are closely tied to those locations where it has active employee teams volunteering for the nonprofit. "We are much more interested in trying to put our dollars into programs that our employees will get behind," says Hield.

Volunteerism has now found its way into the formal grantmaking operations of many companies. Cargill and TCF will often look more favorably on a grant application if their employees volunteer for the organization. The St. Paul Companies asks grant applicants if they need volunteers right on its application form, and will feed those needs into its employee volunteer system. The Dayton Hudson Foundation has created a volunteerism focus for part of its grantmaking, and has funded volunteerism training and a new volunteering handbook.

At Malt-O-Meal in Northfield, Minn., employee volunteers have taken their involvement in the company's grantmaking one step further by creating the M-O-M Cares Employee Foundation, which is funded and managed entirely by Malt-O-Meal employees. It is the first foundation of its kind in the state.

Land O'Lakes has integrated both its employee volunteerism and in-kind donations with its funding focus on alleviating hunger. The company matches, pound for pound and dollar for dollar, its employees' donations to a nationwide Food Share program, and also contributes about $500,000 in food per year to Second Harvest food shelves.

Toro has made efforts to become more strategic with its in-kind contributions program. Along with providing a cash grant to Habitat for Humanity groups, for example, it will also donate Toro lawn mowers for the new homes they build. Toro has also developed a policy of contributing products instead of cash in response to sponsorship requests. "It's a positive way of saying 'no,'" says St. Dennis. "And we've often found that an organization can raise more money with the prize than if we gave them a small grant."

Like Toro, many companies are struggling with how to best handle the numerous sponsorship requests they receive each month. In an era when they are trying to be more focused and strategic in their work, some corporate grantmakers question whether sponsoring nonprofit fund-raising events is an effective use of their resources. "I'm never quite sure how many dollars get to the actual charitable endeavor," says TCF's Bell, "or if it's just a full employment exercise for the event."

Several corporate grantmakers say their official policy is to not sponsor fund-raising events, but admit they find themselves making selective exceptions for various reasons - whether due to pressure from company executives or because the event is a particularly good fit with the company's grantmaking guidelines.

Tackling New Challenges

One issue that seems to be more on corporate grantmakers' minds than it was three years ago is the challenge of how to measure the benefits of maintaining a good presence in the community. Although grantmakers of all types are starting to explore ways to measure the results of their work, the pressure to do so is perhaps the greatest for corporate grantmakers — who must answer to boards, employees, shareholders and customers. "All the other departments are asked to measure and report on their performance, so why shouldn't we?" says ReliaStar's Egge. "It's just good business sense."

But even after they've come up with some good measures of the value of their work, corporate grantmakers are also grappling with the best way to communicate that value to their many and varied constituencies. Determining how to communicate your good work in a way that's cost-effective and doesn't appear self-serving is a major challenge, but a growing number of companies are sensing that it is important. "If people don't know you're a contributor in the community because you never seek that recognition through publicity or other means, sometimes there's an assumption that you're not doing anything," says Hield. "We're proud of what we do, and one of the ways to make sure that people understand that is to communicate it."

The flip side of the coin, of course, is that as their grantmaking dollars and visibility continue to grow, some corporate givers say they are feeling more scrutiny of their actions than in the past. As companies continue to blur the lines between their philanthropic impulses and their business objectives, they inevitably face criticism in some circles for basing their giving decisions not on the greatest needs of society but on the greatest needs of the company's profitability.

In response, corporate grantmakers say that if they can help address any of society's many needs while also benefiting the company in the process, it's a win-win situation. "If a company is willing to give based on their area of interest or their brand, better that than not giving at all," says Park. "There's so much to be done, that any piece we can carve out and make a difference in seems to make sense to do."

Side Story
Corporations' Giving Structures As Varied As They Are

There are almost as many different ways for a corporation to give as there are corporations.

Corporate grantmakers share some things in common. The primary source for their grantmaking funds are their profits, for example, and they all receive a tax deduction from the federal government for charitable donations of up to 10 percent of their pre-tax earnings. After that, the similarities start to fade.

While some corporations give through a separate foundation, others choose to make their charitable contributions through a corporate giving program. Still others use a combination of both giving vehicles.

And there are different types of corporate foundations. Some corporate foundations have an endowment, just like a private foundation, and give from the earnings on these assets. But most corporate foundations operate as a flow-through vehicle, where the full contribution from a corporation to its foundation is passed on to nonprofits each year. Some flow-through corporate foundations may also have a reserve fund, to be used if the company has a particularly poor year.

Some companies prefer to distribute their contributions through a corporate giving program instead of a foundation because foundations must follow stricter IRS regulations. A foundation can only give money to tax-exempt, charitable 501(c)(3) organizations, for example, and must follow a separate set of tax reporting requirements. A giving program also provides a company with more flexibility for such activities as employee matching gift programs.

On the other hand, some companies find that giving through a foundation can help them gain more visibility for their grantmaking efforts. "We wanted to make the statement that we are committed to the community for the long haul," says Pentair's Jeanne Benson in explaining the reasons why her company decided to establish a foundation earlier this year. Benson notes that a foundation also provides more structure for handling her company's rapidly growing grantmaking dollars - which have tripled in the past five years.

In addition, an endowed foundation can provide a more stable source of funding for a company's philanthropy from year to year, allowing them to give in good times and bad. That was a key factor in Land O'Lakes decision to create a foundation last year, since the company and its customers work in the cyclical farming business.

Bonnie Neuenfeldt, executive director of the Land O'Lakes Foundation, says that one surprising benefit of establishing the foundation is that the company has developed a more long-term focus for its philanthropy. "We've seemed to become more philosophical now that we've built in some perpetuity and aren't just giving off of profits," she says.

The giving decisions at corporate foundations are usually made by a board of trustees comprised of representatives from the company's senior management. Giving decisions for some corporate foundations and giving programs are made by the company's board of directors. Still other corporations assign some or all of their giving decisions to various employee committees.

Some larger corporate foundations and giving programs have their own dedicated staffs, while others may be operated by employees who also have responsibilities in corporate communications, human resources, community relations or the CEO's office.

Side Story
Pillsbury Survey Reveals Benefits of Employee Volunteerism

Volunteering is a powerful tool for influencing employee attitudes and behaviors and for promoting professional skill development, according to a recently released research report involving employees at The Pillsbury Company. The research was based on a 1997 survey of 250 Pillsbury employee volunteers conducted through the University of Michigan Department of Psychology, plus the company's own annual opinion survey of all employees. Among the report's findings:

• 91 percent of employee volunteers report that volunteering enables them to develop managerial, teamwork, problem-solving and strategic management skills.
• 89 percent of supervisors say that employee volunteers engage in positive work behaviors more frequently than do non-volunteer employees.
• Employees who volunteer are more satisfied with their work, identify more with the company, and have more confidence in management than do employees who do not volunteer.

Copyright 1998 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher is prohibited.

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