Chapter 2 - The context - trends in not-for profit partnerships
In this section:
- 2.1 Strategic business investment
- 2.2 Government initiatives
- 2.3 Network governance
- 2.4 Social enterprise
- 2.5 The trend to collaboration
- 2.6 Chapter summary
This study into the not-for profit sector response to business engagement and partnerships is undertaken in the context of a range of developments that have bearing on the issues and provide a context for it.
These include a range of government initiatives in place or projected around not-for-profit reform, evolving concepts and practices in government broadly described as network governance, new approaches within the sector itself such as social enterprise, and importantly a significant shift in the way business, especially the large company sector, is seeking to engage with community organisations.
Strategic business investment
As first noted in a report by the Centre for Corporate Public Affairs in 2000 (Corporate Community Involvement: Establishing a Business Case) and confirmed in that of 2007 (Corporate Community Investment in Australia), there has been a clear trend in the public company and government business enterprise sectors to move from a concept of philanthropy (called by some pejoratively in this context ‘cheque over the fence’ giving) to a much more strategic approach.
This requires a substantially greater focus on a business case for social contributions, characterised by the language ‘corporate social investment’, ‘community investment’, or as a component of ‘sustainability’.
This does not deny altruism as a component in the mix of motives and elements in corporate engagement with the not-for-profit organisation, but the link to strategy that is most often now sought in at least the larger public companies is ‘enlightened self-interest’.
Corporate respondents to the 2007 study agreed strongly with the propositions that corporate community involvement was what you have to do to meet external expectations, an obligation of business as a citizen, worth doing for external reputation and other benefits, and an integral component of strategy and the business model.
In expending resources on community involvement, only 12 per cent of respondents in the 2007 report said they sought no benefit or philanthropic motive only, whereas 44 per cent said they sought generalised benefit for their companies, and 44 per cent said that a focused business case was required or assumed.
The nature of the business case will vary between industry sectors, locations and individual company circumstances. However there are a number of overarching factors relevant to their relationship with NFP organisations.
At a general level there is the need to establish and maintain positive reputations in an environment of community scepticism or distrust of companies, particularly in relation to industry sectors which have significant impacts on communities, and to benefit individual companies seeking positive differentiation by alignment with social or environmental causes and with relevant stakeholder communities.
Positive benefits are seen to arise from what companies see as enhanced community ‘licence to operate’, becoming an employer of choice in a competitive labour market, and broadening the perspectives of employees through external community activities.
Enhanced brand awareness through sponsorship, and cause-related marketing provide more direct commercial benefits. Companies are also increasingly finding other points of mutual interest with not-for-profit organisations such as assistance with sustaining biodiversity, financial literacy, technology-enabling for the underprivileged, and training Indigenous labour in remote communities.
There is a qualitative difference in the approach of these strategically oriented public companies vis a vis private and ‘closely held’ companies. The former are acting as trustees of shareholders funds, while owner managers can more appropriately indulge their personal interests or personal philanthropic agendas with their own surpluses from economic activity. Notwithstanding this, the business value of active community investment is still relevant, regardless of their ownership structure.
The now strongly entrenched and more strategic approach of the corporate sector in Australia has great significance for the way it seeks to relate to NFP organisations.
A decade or so ago it was common for the large bulk of corporate resources going to community activity to be styled ‘donations’ or for some, ‘grant making’. Much of it flowed from donations committees of the Board of Directors, without an overarching policy or strategic framework. It was frequently distributed by one-off, and ad hoc responses to requests from worthy causes, although, on the journey to a more strategic approach, the range of eligible NFP sectors was narrowed, and for some, focused on community areas according to their relevance to corporate interests.
The 2007 study indicated that two thirds of the major companies surveyed contributed less than 20 per cent of their community investment (cash and kind) in response to requests for support, and only 7 per cent contributed 60 per cent or more of their corporate support in this way.
An increasing number of companies are contributing funds under matched giving programs where staff determine the direction of the giving, or via one-off grants or matching programs to support staff who are actively engaged in community activities. The corporate motives include corporate philanthropy, but also to be an employer of choice and encourage a more community engaged and socially aware workforce.
While companies are at different stages of the journey to a more sophisticated business-case oriented approach, many have pretty much arrived and are exhibiting the following major characteristics.
- Clear policies or frameworks are established and agreed by senior management and the Board within which specific plans for community engagement or investment are established. These plans would normally be developed by public affairs departments, or in the case of brand focused sponsorship or cause related marketing, by marketing departments. In some companies foundations have been established to make decisions on these activities, but again normally within a framework of corporate policy. Delegation can be made to business units or managers in geographic locations, depending on circumstances, but again aligned with the overall corporate framework.
- There is a strong trend to fewer, deeper, relationships with NFP organisations. For a variety of reasons companies are seeking closer and more sustained engagement. These include the higher profile that comes with a more concentrated and hence richer contribution, efficiency in resources used, fuller engagement and sense of satisfaction for staff, and a greater capacity to ensure stewardship and accountability for the corporate resources employed by recipient organisations. The more sustained and less ad hoc nature of this engagement helps achieve these goals while giving more certainty and sustained support through business cycles.
- Companies, and in many cases NFP organisations, have sought increasingly to formalise these relationships in partnership agreements, memoranda of understanding or strategic alliances. There is a broad range in the degree of specificity and sophistication in these agreements but they will typically include mutual obligations and what the partners expect of each other, key performance indicators and often prior determinants of success, review periods and timeframes, including anticipated timing of exit arrangements. Some NFP organisations have resisted mutual obligation commitments, in some cases seeing them as onerous or unreasonable, in others expecting simply as a right, the more traditional arms length relationship with financial supporters. As one NFP interviewee said, ‘give us the money and let us get on with it’.
- In determining the direction of NFP support from the myriad of opportunities and requests, major businesses are aligning their engagements with their specific company or industry issues and competences. This is best illustrated, as we have noted above, by the engagement of financial companies in financial literacy, technology companies in technology enabling, and mining companies in support for the environment and Indigenous communities.
- This is often closely associated with the linkages companies want to establish with community groups or activist organisations most interested in their industries. Stakeholder relations are seen as an important part of business’ community and political licence to operate, and proximity and optimising common interest is critical to breaking down negative stereotypes and dialogue on issues.
- A major theme emerging from the Centre for Corporate Public Affairs 2007 study was the aspiration for many employees to be both engaged in community activities through their employment, and the value they placed on their employer (or potential employer) exhibiting corporate social responsibility.
Each of these characteristics of front of the curve corporate community investment in Australia has relevance to business’ relationships with NFP counter-parties and provides an important context for the investigation into their attitudes and experience, which is the central focus of this report.
It should be stressed that these findings reflect the approach of larger companies. Zappala and Cronin (2003) found that 90 per cent of top 100 companies claimed ‘partnerships’ with NFP organisations, but in other studies, as the sample broadened to include smaller companies, this high level of engagement declined significantly. Commenting on the findings of the Prime Minister’s Community Business Partnership Survey (DFCS 2005), Zappala and Lyons (2008) conclude ‘organisational size is related to the likelihood of business having a partnership, with 40 per cent of businesses with over 500 employees reporting a partnership compared with 20 per cent employing 10 people — or less’.
They also note that larger NFPs are more likely to engage in partnerships than smaller ones.
For example, organisations with more than 100 employees are almost two thirds more likely to have partnerships with business, compared with all organisations, and almost four times more likely to have partnerships compared to organisations with no paid staff (Zappala & Lyons 2008, p.25).
Zappala and Lyons (2008, p.27) also note that ‘increasingly, not-for-profits are forming partnerships with several businesses’. The Smith Family, for example, has around 70 business partnerships at the national level and around 500 smaller business partnerships in local communities.
Many of the themes discussed in this section are explored further in subsequent chapters of this report.
Government initiatives
In recognition of the growing importance of the not-for-profit sector, governments have paid close attention in recent years and taken initiatives to facilitate their positive development.
This has occurred internationally. In the US, the trend in government approach to NFPs has been to encourage social enterprise and innovation but with little direct intervention by the state, and with most policy development coming out of social innovation and academic centres and think-tanks.
In the U.K., the Blair and Brown governments have actively provided incentives for social innovation, and it is a specific policy focus, with the Treasury taking an active role to develop the ‘Third Sector’ as part of overall economic development.
In Australia there are different approaches to understanding and coordinating policy and research to understand and encourage social innovation via the NFP sector. There is a mix of policy development by some leading NFPs, from a small number of academic centres and units, and from collaborations between business and some NFPs.
Over the past decade in Australia, there have been important taxation initiatives to support cultural gifts, enable the spread of years available for tax deductibility to eligible organisations and make minor benefits provisions in taxation legislation friendlier to fundraising.
A further significant initiative was developing ‘prescribed private funds’ which enabled friends, individuals, and businesses with greater flexibility to start their own trust funds for philanthropic purposes.
The Australian Government has also taken initiatives to support work-place giving, has sponsored research such as the 2005 Giving Australia Report and the 2007 study, Corporate Community Investment in Australia. Partnerships between business and NFP organisations were encouraged through best practice awards, toolkits for small and medium enterprises, and support for capacity building organisation Nonprofit Australia.
A major initiative has been the matched funding endowment of the Centre For Social Impact, initially a partnership between the business schools of the Universities of New South Wales, Melbourne and Swinburne, but with the intention of including others.
Its purpose is to provide national leadership in research and professional development in NFP management and corporate social engagement.
Initiated as a recommendation of the then Prime Minister’s Community Business Partnership, this has been well received across all sectors and enjoys strong bipartisan support, as evidenced by the Deputy Prime Minister, Julia Gillard (2008), who said:
[This is] a Centre which can bring together research, teaching and cross-sector partnerships to create positive social impact at the intersections between government, business and community life. I am confident that the centre will be a great source of answers and of practical initiatives.
In Australia, the role of government in fostering business community partnerships is greatest at the federal level, with government generally seeing itself playing a large role fostering development of the NFP sector, and seeing business having a part in this. There are also various State Government initiatives, though these are uncoordinated nationally.
The Rudd Government has continued this in its early days, including initiating developments within the framework of its ‘Social Inclusion’ agenda.
In February 2008 the Prime Minister announced formation of a Social Inclusion Committee of Cabinet, chaired by himself, with the Deputy Prime Minister as Deputy Chair, and including Senator Ursula Stephens, Parliamentary Secretary for Social Inclusion and The Voluntary Sector. The Government also appointed an Australian Social Inclusion Board to advise it on new ways to deal with social disadvantage.
Parallel initiatives have been pursued by the Australian Government to explore aspects of the NFP sector and issues affecting it. These include a reference to the Productivity Commission to consider what tools might be available to measure the contribution of the NFP sector, and the inclusion of the sector for consideration in its broad review of the taxation system. The Senate Economics Committee is also inquiring into disclosure regimes and regulation of the sector.
The Australian Government also committed itself to a ‘National Compact’ with the NFP sector although its nature and scope is under review and subject to input from a broad consultation with stakeholders.
State governments have also shown a deeper interest in the sector in recent years.
The Victorian government has sponsored two reviews, one led by Professor Allan Fels AO, to advise on ‘Stronger Community Organisations’, and a ‘Review of Not-For-Profit Regulation’ by the State Services Authority.
In response to these reports the Premier of Victoria announced a twenty-five point action plan, which includes reducing regulatory burdens and supporting inter-governmental collaboration and reform, assisting fundraising, simplifying service agreements and grant processes, and supporting innovation, capacity building and dialogue with the various levels of government.
Amongst other state government initiatives is the creation by the South Australian Government of the Australian Centre for Social Innovation to explore and facilitate innovative and collaborative approaches to community issues.
The National Reform Agenda being driven through the Council of Australian Governments (COAG) will address co-ordination and interaction between levels of Government and the complexity and fragmentation of service delivery.
Network governance
A major but still embryonic trend in public policy and public administration, reflecting developing collaboration, has been called ‘network governance’.
Network governance requires changing relationships within government to break policy silos and ‘join up’ to pursue holistic outcomes, and between government, business and NFP sectors to access the range of resources necessary, or utilise resources differently, to generate policy solutions (Barraket 2008; Allen Consulting Group 2006).
The focus in academic and public policy debate around network governance has been at the local level associated, for example, with economic development, public security and social concerns.
However, the concepts are being applied also to broader issues where government, NFPs and businesses have a common interest and contribution to make by working together.
Some government agencies are supporting these integrated approaches here and in other parts of the world, using the language of social inclusion and network governance to describe aspects of these new forms of community engagement.
A leading academic in this field notes:
…The new narrative of interdependence has, as its institutional twin, a new model of co-ordination in which diverse ties and flows of action define an emergent structure. This “network governance paradigm” suggests a possible breakthrough in public administration and organisational theory by providing a means to tackle problems in a multi-dimensional and locally flexible way. It forges a new path between bureaucratic centralism and privatisation and as such may be regarded as the merging model of public organisation for the twenty first century (Considine 2005, p.2).
There are several reasons for the enhanced role of non-government actors, namely:
- the prevalence of ‘wicked problems’ that require multiple programs, agencies and layers of government, but are also difficult for governments to resolve on their own
- appreciation that resolution of issues can benefit from the experience and knowledge of actively engaged business and NFP stakeholders who will also be more actively committed to achieving desired outcomes. As the former Secretary of the Prime Minister’s Department said, ‘…we need to empower people permanently so that they feel responsible for community facilities and services by being involved in both their planning and delivery, which can then foster closer relations at the community level that will endure’ (Keating 2004, p.139)
- more sophisticated and informed NFP organisations, business organisations and communities, who believe they have a contribution to make through co-operation and demand greater direct involvement with matters that affect them. The current Secretary of the Prime Minister’s Department concurs, ‘…engaged citizens demand choice and services that are tailored to their needs. They are not satisfied with the delivery of undifferentiated products by out of touch government bureaucracies’ (Moran 2005).
There are numerous examples of this shift from command and control management of issues to delegation and working with business and communities. Classic examples are local community development, addressing social concerns in areas of chronic under-privilege, and local safety committees organised by the Victorian police. But this works also for broader spheres, such as providing education and training opportunities for disadvantaged children and youth, and collaboration in public health and the environment.
This study explores the challenges of collaboration from the NFP perspective. As The Smith Family comments:
Collaboration is not something that organisations can or should enter into lightly — it demands the cultivation of new resources and skill-sets, including the creation of an organisational culture that is open to the challenges posed by new approaches to budgeting and control, trust and accountability (The Smith Family 2007, p.10).
Both sides of the business-community relationship as well as governments (as they shape policies and administer programs), should learn from the experience of the NFP sector articulated in this report.
Social enterprise
Strategic partnerships across the sectors, including government, are a common characteristic of the developed phenomenon frequently termed as ‘social enterprise’.
Achieving an agreed and clear definition of social enterprise is a work in progress, but encompasses community initiated and controlled organisations that provide entrepreneurial and innovative contributions to community issues and interests. Activities vary greatly but are focused on community needs that arise in the face of state and market failure (Barraket 2008).
They will normally embody the multiple resources and direct engagement of the three sectors, and frequently include investing in their own business activities that generate income, provide social participation, and meet other community objectives such as employment and education for the underprivileged.
In the US in particular, some of the outcomes of social enterprise are embraced as ‘social innovation’, and such innovation is pursued with vigour in many business-NFP relationships.
Social enterprise and social innovation that can be an outcome of it, is distinctive also because most frequently, it occurs outside the realm of the government.
By its very nature, the risk that social enterprise carries is co-opted by its underwriters — and in Australia and nations such as the US. This rarely is government.
Corporations — privately held and listed publicly — and most NFPs manage financial if not commercial risk daily. This common thread, married in a partnership that supports or furthers a social enterprise, can therefore produce societal and organisational outcomes in very different manners than relationships driven by governments.
While the development of social enterprises is widely supported in each of the three sectors (though not well understood), these deep tripartite relationships and shift towards business models have generated criticism from more conservative observers and NFP leaders as letting governments off the hook and ‘simply a capitulation by not-for-profits to the dominant logic of market capitalism’ (Barraket 2008, p.136).
As this report will show, while there is a high and increasing level of support and many NFP organisations are keen to pursue partnerships, some in the NFP sector are suspicious and critical. As Zappala and Lyons (2008, p.18) note:
There are still many in the not-for-profit sector, especially in the community services and environment movement, wary of forming closer alliances with business. They argue that many of the social and environmental problems they confront are the result of government policies enthusiastically advocated by business and the product of the thoughtless pursuit of profit at any cost.
They also cite concerns we explore later about the pursuit of efficiency distorting the mission of organisations, and what they perceive to be an unequal balance of power between businesses and their NFP partners (Zappala & Lyons 2008).
Despite some deeply ingrained hostility by some NFPs to business, and its motivations to pursue partnerships with NFPs, the trend to closer and more sustained relationships appears to have traction.
Barraket (2008, p.3) notes that recent societal expectations and policy trends ‘that favour collaboration and partnership have driven the mergence of new not-for-profit and cross-sectoral networks which seek to maximise the collaborative advantage in order to respond effectively to the needs of community, place and characteristic …In the face of these pressures, we are seeing in Australia, as in other countries, a range of responses from the sector. These include; new approaches to mobilising resources, through commercial activity; the formation of new partnerships within and across sectors; and the establishment of new forms of “hybrid” organisations that combine the logic of business with a not-for profit mission’.
The trend to collaboration
The deepening of these trends and their convergence in pursuit of a more vibrant and inclusive society will lead to increasing collaboration along the continuum from philanthropic to integrative, with the various characteristics depicted in Figure 2.1.
Three Stages of Business and Community Collaboration
Source: Austin 2002.
Our research for this report suggests most NFP and business relationships are in the philanthropic to transactional stage, with some significant collaborations being integrative.
New approaches, thinking and cultural change in business and NFPs — and new policy frameworks for governments — will be required to move even more relationships to the integrative stage, where we believe social innovation can be maximised.
Chapter summary
- The corporate sector is moving its corporate community investment from philanthropy to a far more strategic approach embedded in business strategy. The motivations for this are corporate citizenship, meeting community expectations and enlightened self-interest
- Clear policies, frameworks and strategy are driving corporate community investment in and engagement with not-for-profit organisations
- Larger NFP organisations are more likely to engage in corporate community partnerships than smaller NFPs
- The role of governments internationally, in how they approach nurturing partnerships between NFPs and business, differs. At the national level in Australia, the role is one of fostering development
- Network governance — government, NFP and business joint pursuit of holistic outcomes — is embryonic in Australia but gathering pace
- Social enterprise — initiatives that are community driven and controlled to achieve societal outcomes, including social innovation — is growing. Business and many NFPs, but not governments, share characteristics of taking and managing commercial risk, which can create new corporate community partnership opportunities to develop social innovation via social enterprise
- The trend in corporate community partnerships is towards ‘integrative’ collaboration, where business and the NFP mobilise resources, new services and activities to develop innovative solutions to local and broader community issues. Some partnerships in Australia are at this stage, but many remain in a ‘philanthropic’ stage (donor and recipient relationship). More still are in the ‘transactional’ stage characterised by partnerships (but including sponsorships), where the main outcomes produced include better brand exposure for NFPs and business, and also some societal impact
- Many NFP organisations — especially larger entities — would prefer to engage in integrative collaborations