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Giving And Getting Something Back

Giving And Getting Something Back

Clifford V. Smith runs General Electric Co.'s nonprofit arm, but he still watches the bottom line. As president of the GE Fund, Smith must abide by a rigorous "return on investment" discipline for divvying up donations. The fund is pumping $20 million into high schools in 14 cities to help supply GE with a ready pool of talent. It gauges the program's success by how many students go to college and has hired Rand Corp. to conduct an independent evaluation. "When the business guys say, `What are you doing with our profits?' I say I'm investing them," Smith says.

Sound more like business than philanthropy? Well, it is. After years of loose purse strings and little follow-up, companies are getting tougher when it comes to charity. They're putting a premium on performance and measuring how nonprofits use their dollars. And rather than seeking just to do good, companies are linking gifts to marketing campaigns. Sports gear maker Nike Inc. is sponsoring sports events at local Boys and Girls clubs--and then showcasing them in their national TV and print ads.

A new Conference Board report calls this new approach "strategic philanthropy" or "financially sound goodwill." The study surveyed 463 U.S. companies and found that companies taking a more businesslike approach to charity reported a better image, increased employee loyalty, and improved customer ties.

Companies say they simply can't afford to just give money away. Many slashed donations during the last recession and are still being tightfisted. Corporate donations, adjusted for inflation, declined by $1 billion from 1989 to 1994, says the American Association of Fund-Raising Counsel, a New York trade group. Some corporations are moving away from traditional grants almost entirely. Rather than give cash to help improve math and science education, Hewlett-Packard Co., for one, prefers donating its computer equipment to schools. HP not only gets to deduct its manufacturing costs, but it also builds goodwill and cements relationships with budding consumers.

Johnson & Johnson sees giving as a way to spur sales, too. It's spending $585,000 a year to send 40 chief nurses to a grueling, three-week, mini-MBA course at the University of Pennsylvania's Wharton School. As a condition of their participation, J&J requires the hospitals' top executives to attend the final three days and design a business plan for their institutions. Keeping hospitals healthy, says Curtis G. Weeden, J&J's vice-president for corporate contributions, is essential to future profits. Weeden also acknowledges that these nurses and executives play a key role in hospital buying decisions.

Other companies, too, are sticking with causes that further their businesses. Amoco Corp. used to give to everything from the arts to medical research. But in 1992, it decided to focus on education and community issues. The need for well-trained workers inspired Amoco to pick education, says Patricia Wright, the Amoco Foundation's executive director. And the oil giant has a large market share in the inner city.

CLOSE WATCH. One Amoco project is Fishers of Men, a new mentoring program that aims to help young men on Chicago's bleak West Side. Amoco was so eager for results that even before the plan was off the ground, it set aside $40,000 of its $250,000 grant for evaluation and hired a University of Illinois professor to oversee the program.

Such scrutiny is pressuring donprofits to adapt--or lose funding. Dennis Walcott, president of the New York Urban League, almost lost $5,000 from American Express Co. when the company wouldn't buy a table at the group's annual dinner. Not enough to show for it, they said. So he got them to donate the sum to the league's Parent Resource Center, which helps parents negotiate New York's public schools. "You've got to be flexible," says Walcott. These days, even philanthropy is a buyers' market.

Aiming at the Bottom Line

Companies are seeking a return on charitable contributions by:

NORMAND COUSINEAU

-- Limiting donations

-- Funding specific programs rather than giving cash

-- Donating equipment to potential customers

-- Monitoring recipients' performance

DATA: BUSINESS WEEK