Doing Good by Business

by RaeAnne Marsh


Philanthropy  wasn’t just an element added to the business when Robert Thornton launched Paper Clouds Apparel eight years ago; it was the foundation on which his business model was built. Captivated by the drawings of a special needs child, he conceived the idea of developing a line of T-shirts featuring designs by special needs children and donating half of the company’s profits to the relevant nonprofit.

A more common convergence of core business and philanthropic endeavor, however, is illustrated by Cox Communications’ development of a technology center for Goodwill so Goodwill’s clients would have access to the Internet. “It’s an important business prerogative for us that everyone have access to the Internet,” says Susan Anable, vice president of public affairs for the Southwest Region. Adding, “We help organizations connect people who need to connect to the Internet or to technology,” she shares that Cox Charities donated $400,000 last year to the Boys & Girls Clubs for technology centers in Arizona.

“Cox has a long tradition of being invested in the communities we serve,” Anable says. “It’s been a cornerstone of the family’s engagement in the business.” There is community support built into the community relations budget and determined by the community relations team. The marketing team uses some of its budget in philanthropic partnerships. And there is an employee grant-review process to decide how Cox Charities dollars are awarded — last year, employees helped raise and then awarded a total of $722,500 to 91 Arizona nonprofits. Another philanthropic arm is the James M. Cox Foundation, which provides funding for capital campaigns and special projects in communities where Cox Enterprises does business. Cox supports nonprofits in the community by making use of its expertise; also by making use of resources inherent in its business identity as a communications company — airing public service announcements that help the community organizations promote their cause and serve their constituents.

Concentrating on resources unique to its business is the route Adam Goodman has taken his company, Goodmans Interior Structures. Goodmans’ Eye for the Good Guy, for instance, was a long-running program conceived to give an office makeover each year to a deserving executive director of a nonprofit. Although the company has a long history of direct philanthropy, it was not always so well matched to its core business; the alignment now is a result of a focused introspection. “In the early 2000s, I was digging into the purpose of the business,” Goodman says, sharing that he was not motivated to just sell product. So he went directly to his clients and his employees, asking the former, “Why do you do business with Goodmans?” and the latter, “Why do you work for Goodmans?”

He discovered an underlying commonality when he aggregated the responses collected over a year’s time. Hospital clients told him his company helped them to heal patients and shared how important it was that Goodmans understood their needs. From higher education clients, Goodman heard that his company impacted learning outcomes by helping students learn. Corporation clients said Goodmans made them more competitive by helping them create better work environments to attract and retain talent. Government clients told him Goodmans helped them lower the cost of government by reusing existing assets instead of buying new. And his employees echoed all those sentiments. “Therefore, the purpose of Goodmans is to change the community,” he recalls determining. The next step: “If that is our purpose, how can we push it further; be intentional about it?” That was when he started to look for creative ways Goodmans could impact the community.

An office hockey competition was organized, and was a popular annual event for eight years. Sixteen teams of architects, interior designers and commercial real estate brokers — industries with which Goodmans works — “ran” around the court while seated in an office chair as a fundraiser for Southwest Autism Research and Resource Center. Working with Free Arts for Abused Children, Goodmans created its GoodART program in which a client, when its project is completed, picks out art from Free Arts and Goodmans mattes and frames it for the client’s office and makes a donation to Free Arts.

Goodman also challenged his employees: “What of the resources we have, the assets we have and the talent we have can we use to help the community?” Thus was born GoodTHREADS from a suggestion by an employee in Tucson who was a foster parent — creating Tucson’s only foster clothing bank. All it takes is a warehouse and some volunteers, Goodman notes, sharing that the response has been overwhelming.

Being cognizant of resources natural to the business underlies some of Cox’s and Goodmans’ philanthropy. Turning those into opportunities to benefit the community may require almost no change in actual business operations. Goodmans’ AIM to Make a Difference is a case in point. “When we deliver new furniture, the customer often says, ‘Please take away the old furniture.’ Dealers usually just sell it. We take the surplus furniture, store it in a warehouse, and offer it free to nonprofits.” Goodmans will deliver it for a fee, but Goodman says most nonprofits pick it up themselves.

Core Values and Co-Ventures

For Grimaldi’s Pizzeria, being true to the company’s core values was the consideration that helped focus the direction of its philanthropic effort. “Our stores are family-friendly restaurants, so our focus is always around families and children,” say President and COO Eric Greenwald. As a smaller company, Grimaldi’s had been doing its fundraising for regional and state-specific charities. With the Scottsdale-headquartered company now coast to coast, from California to South Carolina, Greenwald discussed with his director of marketing strategies around the company’s philanthropic efforts, and looked for a national nonprofit. No Kid Hungry fit the bill — it’s a campaign by Share Our Strength, a nonprofit working to end child hunger in America; although SOS is a national nonprofit, it sends participating restaurants fact sheets detailing the impact locally. Admitting, “I was surprised that we were helping kids in Scottsdale!” Greenwald notes 300 children go hungry every day in the Phoenix area. The month-long campaign is held every September, and this year will be Grimaldi’s third with it.

The nonprofit supplies No Kid Hungry-branded shirts, bracelets and sunglasses to its participating restaurants, and Greenwald encouraged his employees to get creative with their uniform. “This helped get everyone energized,” he says. Adding a further boost, the company’s marketing department sent daily reports to the stores. Noting no one likes to be last, Greenwald says the daily reports “led to fun competition at the store level and by region” as the five area managers came up with ideas to incentivize their employees.

The upshot is increased sales during the month Greenwald says is the year’s slowest — even the first year, which Grimaldi’s got into late and so did not have a full month, saw a 12-percent increase in same store sales. Last year, Greenwald says the Tucson store — the company’s smallest — raised more than $10,000 itself for No Kid Hungry. This shows what can be done, he says, “when you get your staff behind it and you create that positive energy in the story, and you get the people in the area behind it.”

Among other restaurants participating in No Kid Hungry are local-based Fired Pie and the Fox restaurants. It’s one example of a commercial co-venture, sometimes also called “cause-related marketing,” whereby a for-profit business earmarks a specified amount of its sales to be donated to a nonprofit. In some states, such campaigns are highly regulated and may require the business to secure and file a bond — an outcome, explains Carter Law Group’s Mackenzie Woods, of a lawsuit against Yoplait (Mitchell v. Yoplait General Mills) for promoting a “Tops for Cancer” campaign promising a donation to the Breast Cancer Research Foundation in Georgia for each Yoplait top sent in, but not disclosing there was a cap beyond which no more money would be given. Arizona, however, is not a state that regulates them, and Woods says, “We’re seeing an uptick in commercial co-ventures.” Among those adopting this approach are the social entrepreneurs at Seed Spot, a business incubator Woods is involved with.

More Business Benefits

Asked if Goodmans does more business because of its philanthropic endeavors, Goodman gives an unequivocal “no.” Observing, “Our customers don’t care about all this unless we’re the low bid,” Goodman says it’s not a marketing play — but it is an employee attraction tool. “In this day and age, the only way to differentiate yourself in today’s competitive environment is to have top talent. Philanthropy helps us attract the very best talent, and that’s what drives our business.”

Jacky Alling, chief philanthropic services officer with the Arizona Community Foundation, says ACF often sees employee engagement with a business’s philanthropy. “They want to have a sense of purpose,” she says, noting also the business develops a stronger relationship with the employee. “Research says it helps with retention.”

“One of the things employees absolutely love about the company [CopperPoint Mutual Insurance Company] is our involvement in the community,” says Rick DeGraw, executive vice president and chief administrative officer. CopperPoint involves executives and staff in the decisions about what nonprofits to support. “It’s not an extensive application process,” DeGraw says. “We make decisions on a weekly basis as they come in.” Recipients range from big nonprofits such as Arizona Opera and Ballet Arizona to small, startup nonprofits. “We also support Social Venture Partners and Seed Spot, and they help emerging nonprofits,” DeGraw adds. CopperPoint prefers to support programmatic campaigns — “Usually, paying for programs is the most difficult,” DeGraw says — and eschews golf tournaments, where donated funds may go to gifts for participants, for food banks. What it requires is the nonprofit be active in the community, have at least an 88-percent rating on donated money being spent on program, and “be nice people we can work with.” Noting, “We encourage involvement; we want partners rather than people who just take our money,” DeGraw says CopperPoint employees have mentored at least one of the Seed Spot winners each of the last five years. It also operates one of the largest single-school-based Big Brother Big Sister programs in Arizona — in addition to its financial support, 31 of its employees serve as a “big” to a child in the program.

Observing, “The happier people are in the community and the happier people are in their company, the better off we’ll be in the long run,” DeGraw notes, “We’ve shown ourselves to be consistent in helping the nonprofit community.” He sees involvement in the community as good business. “We wind up making money because businesses buy insurance from us. The healthier our economy is, the more businesses there’ll be and the more possibility that they’ll buy insurance from us.”

Much of the cost involved comes out of CopperPoint’s community outreach budget; other comes from marketing outreach, such as splitting sponsorship of a nonprofit event with other business partners. “It strengthens our business partnership,” DeGraw says. And sharing a table affords an opportunity for the companies’ employees to meet. “It’s a way to further develop the partnership with other businesses in the community.”

A business reaps other benefits as well. Terri Wogan, executive director of Social Venture Partners, Arizona, says businesspeople learn to be more strategic and understand due diligence — “look more in-depth” — as a result of the experience they gain with SVPAZ of exploring, vetting, selecting and reviewing prior to making an investment in a nonprofit. SVPAZ is made up of connected business professionals from large companies, mid-sized companies and the self-employed who share a common desire to build community and want to make a difference more than just writing a check. They or their company gives $5,500 a year, and the money is pooled and used to make grants. “We take a venture capital business model and apply it to our philanthropy.”

SVPAZ’s approach is to be more engaged with the nonprofit — “Not just fund the program, but look at capacity to help the nonprofit grow,” Wogan says. The organization’s partners use their expertise in direct involvement with the nonprofits. “If a nonprofit has legal issues, partner businesses will offer legal expertise. If it has HR issues, the former head of PetSmart’s human resources can help with manuals.”

Since 1999, when Jerry Hirsch founded the Arizona chapter of the organization begun just the year before by former Microsoft employees in Seattle, SVPAZ has given more than $4.2 million — plus thousands of volunteer hours, which Wogan estimates to be worth two-and-a-half times that money. In addition, it offers a Fast Pitch Program every year, in which 23 organizations take part in an eight-week program working with a mentor from the business community to perfect a three-minute pitch that culminates with them competing for grant dollars. There is additional training after the competition, says Wogan. “The relationship can go on for years.”

Wogan cites several benefits philanthropic activity provides businesses. In addition to the business being aware of what’s happening in the community with regard to the social sector, it helps employees build problem-solving skills and it demonstrates the business’s commitment to community service.

Beyond Dollars

Community service is a big part of many businesses’ philanthropy. DeGraw shares that about 70 percent of CopperPoint’s employees volunteer in the community, and 27 executives sit on the board or commission of 57 nonprofits. “It’s not a requirement, but we support them in doing so,” he says.

At National Bank of Arizona, Board of Directors Vice Chairman Deborah Bateman says the new CEO, Mark Young, has set an expectation that all executives sit on at least two community boards and all bankers be involved in at least one organization. “That’s the type of employee we are going to attract and will want to stay here because they know their giving is being compounded by their peers and the organization,” she says.

Anable describes Cox employees as “super generous with their volunteer giving.” Hours come to tens of thousands every year — which includes time the company allows as part of the work day, such as for the employee grant review process. Building play houses and tool sheds for Habitat for Humanity served as a team-building activity. Other volunteer opportunities Cox has organized during business hours include taking part in the Red Cross holiday letter campaign, providing materials in the company cafeteria, and tending a community garden at its Deer Valley facility, with the food then donated to shelters. While the cost of most of Cox’s philanthropy is budgeted under community relations, HR takes a little of it for such employee engagement.

Formalizing the Commitment

In some cases, philanthropy may be a regulatory requirement, says ACF’s Alling. She cites the Community Reinvestment Act enacted by Congress in 1977, under which the FDIC rates banks and can take punitive action. “The purpose was to encourage depository institutions to help meet the credit needs of the communities in which they operate.”

Financial contributions are only a part of National Bank of Arizona’s philanthropic efforts. Says Bateman, “It’s usual for banks to do affordable housing, but we also make major contributions in the areas of health, human services, local food banks, local shelters, animal shelters — very localized.” And she notes that even during the recession, NBAZ gave more than $1 million. “We eliminated some things, such as advertising, and realigned that money into sponsorships where our customers and target audience are.” Disbursement is decided by employees, twice a year, with the only direction that the money must go back to the communities and people of Arizona.

All NBAZ’s initiatives and campaigns — “even the way we advertise” — is built around the theme “We want to elevate Arizona,” Bateman says, explaining that over the last several years, the bank has become more intentional and strategic about institutionalizing the spirit that already existed about giving back to the community. “If all you’re doing is coming to work for a paycheck, that’s not enough. We want to be part of our community and part of something larger than us individually in making positive things happen for others in the community.” The bank, which launched its NBAZ Charities 501(c)3 earlier this year, also organizes five fundraisers each year that offer the community an opportunity to give, and in October will launch an employee giving program in which NBAZ Charities will match some of the funds employees donate.

Goodmans recently added a 501(c)3 organization — Rooted in Good — to its philanthropic activities. “People wanted to start making contributions,” Goodman says, relating they told him, “We love what you’re doing, but we want to be able to get the tax advantage.” It was a few years in coming together, but Goodman says, “Now, I’m happy to say we’re accepting donations and are accelerating the program.”

Although his Paper Clouds Apparel business has been operating for eight years, Thornton says he actually considers the launch to have been January 2013 — with a new website and a new contract arrangement whereby Paper Clouds Apparel would work with a nonprofit for a two-week campaign. The organization is also responsible to help promote its campaign, and Thornton says, “Each campaign is as successful as the organization wants it to be.”

The organization submits artwork by its special needs children, and the company’s board of advisors chooses the top four for the campaign. “Not all art translates for a cool T-shirt,” Thornton explains. Paper Clouds Apparel’s new website enables customers to choose shirt style and color, and build their own T-shirt to see how the different designs would look on it. Thornton then fulfills the orders that are placed, and this allows him to avoid excess inventory. “It’s the only way to make money, since I’m giving away 50 percent of the profits,” he says.

Paper Clouds Apparel’s fulfillment process is also designed to benefit the community. Hiring on a temporary basis for each campaign, Thornton employs adults who are special needs people — among whom unemployment is 80 percent, Thornton points out. And he’s found he benefits as well. “Workers with special needs [tend to be] detail-oriented. So they find the flaws, and we have better quality control on the shirts that are shipped.”

Thornton chose to structure his business as a for-profit rather than a not-for-profit company, explaining, “I believe many nonprofits give nonprofits a bad name” regarding such operating expenses as salaries and marketing costs. He has one part-time employee — to write personal thank-yous for each order — and recently hired one additional full-time employee. He expects sales this year to exceed a half-million dollars, and says, “Growth is more about creating jobs and helping the special needs causes.”

Philanthropic Footprint

“There are a variety of approaches,” Alling says, noting ACF has about 20 corporate clients and each has a different approach. Some come to ACF already having a sense of their philanthropic footprint, and Alling says these are sometimes aligned with their business. Intel, for instance, supports STEM programs, which, she says, “makes sense, as it helps them develop a pipeline their industry will need.” Industrial development authorities, which are created to foster economic development, focus on nonprofits that provide workforce training or job creation opportunities, or are business incubators. Others may have a geographic reason, choosing to support nonprofits where the business’s business outlets are.

Among other interesting ways corporations are expressing their business philanthropy, Alling points to Starbucks (not affiliated with ACF) partnering with Arizona State University to offer free online college degrees to its employees. “It’s strategic for retention and to grow a talent pool who will move up the ladder to management, and the employees get a sense they’re being cared about.”

Philanthropy can include employees’ volunteer time and being involved in a nonprofit such as by serving on a board of directors.

For their financial giving, ACF works with corporations to develop the criteria regarding their mission and what they want to accomplish, explains Alling. “First, we work with them on their philanthropic goal at a strategic level, then develop guidelines as to which grant applicants would be eligible.” ACF does the due diligence to vet the nonprofits, and trains its organizations on how to review the grant applications.

Whether Arizona’s recently enacted benefit corporation statute will impact businesses’ charitable endeavors remains to be seen. The statute provides a route for businesses to consider social impact as well as shareholder profits when making business decisions. SVPAZ recently formed an innovation committee to look into how the new law will affect its giving. Goodmans, which had previously gone through the process to be licensed a B Corporation by B Lab and became the first benefit corporation in Arizona after the law took effect in January, “pursued it because it is validation that we’re doing what we say we’re doing,” Goodman says.

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