The state of corporate philanthropy:A McKinsey Global Survey                                                              ...
2The state of corporate philanthropy: A McKinsey Global SurveyConsumers’ growing expectations of companies make corporate ...
3 Why give?Companies and consumers have long seen                                                 offshoring, obesity, exc...
4or brand (Exhibit 1). And some 80 percent                                           goals, such as building knowledge abo...
5What matters, who matters, and where companies are giving insteadExecutives overall say their companies are much         ...
6 One explanation may involve the interests of                                                improving employee recruitme...
7Similarly, addressing social and political                                               the importance of branding as a ...
8What effective companies do differentlyWhatever the business goals of their philan-                               Still, ...
9Where these companies differ is in how much                                               community needs (47 percent com...
10                                 Survey 2008                                 Corporate philanthropy                     ...
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The State of Corporate philanthropy_McKinsey_2007

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The State of Corporate philanthropy_McKinsey_2007

  1. 1. The state of corporate philanthropy:A McKinsey Global Survey Jean-François MartinCorporate philanthropy can help companies meet consumers’ rising expectations of business’s role in society,say respondents to a McKinsey global survey.However, only about a fifth of all respondents say that philanthropic programs at their companies are meetingsocial goals and stakeholder expectations.At these companies, philanthropy programs are more likely to address social and political issues relevant to thebusiness, to be collaborative, and to meet any business goals companies have for them.Another small group of respondents say they intend their philanthropic programs to go beyond enhancingcompany reputation by addressing concrete business goals, such as learning about potential new markets.
  2. 2. 2The state of corporate philanthropy: A McKinsey Global SurveyConsumers’ growing expectations of companies make corporate philanthropy moreimportant than ever. But many respondents to this survey say their companiesaren’t meeting social goals or stakeholder expectations very effectively. Companiesthat are doing well are taking a more strategic approach.Corporate philanthropy can be an already more likely to involve collaborationeffective tool for companies that are trying with other companies. Finally, these companiesto meet consumers’ rising expectations of are much likelier than others to say they arethe role businesses should play in society, say achieving any business goals they have set forrespondents to a McKinsey global survey.1 their philanthropy programs in addition toThe survey also suggests, however, that social goals.companies aren’t using that tool as well as theycould. Executives doubt that their philan- A small group of respondents say their com-thropy programs fully meet their social goals panies are reaching beyond traditional corporateor stakeholders’ expectations for them. goals for philanthropy programs—such as enhancing the company’s reputation or brand—About a fifth of the respondents say their to pursue more concrete business goals, suchcorporate philanthropy programs are very or as gaining information on potential markets.extremely effective at meeting social goals Their approach to focusing the programs alsoand stakeholder expectations. Their companies differs from the approach at other companies.take a somewhat different approach thanothers do: their programs are more likely toaddress social and political trends relevantto the business and to be influenced bycommunity and business needs. Executivesat these companies expect their programsto become more global and say that efforts are1 The McKinsey Quarterly conducted the survey in January 2007 and received responses from 721 executives around the world—74 percent of them CEO s or other C-level executives. The data are weighted to reflect the proportional representation of segments in the total population.Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  3. 3. 3 Why give?Companies and consumers have long seen offshoring, obesity, excessive consumer debt,corporate philanthropy as a way for companies environmental sustainability, and the governanceto benefit the communities where they are of resource-rich, low-income nations. Althoughlocated—donating funds to local schools, hos- today’s expectations are wide-ranging, three-pitals, and orchestras, for example. In recent quarters of the executives who responded to thisyears, however, as society’s expectations survey say corporate philanthropy is at leastof companies have risen2 and as many somewhat effective in meeting the expectations.companies have begun operating in more far-flung locations, they are expected to address In addition to social goals, the vast majoritya growing list of needs. Companies that of companies—nearly 90 percent—now seek20 years ago were held accountable only for business benefits from their philanthropydirect, contractually specified, or regulated programs as well. When respondents were askedconsequences of their actions today find what business goals they try to reach throughthemselves held accountable for the consequences philanthropy, they most often say their goalsof their actions in areas as disparate as include enhancing the corporate reputation2 See “Assessing the impact of societal issues: A McKinsey Global Survey,” November 2007; and “CEO s as public leaders: A McKinsey Survey,” January 2007, both available on mckinseyquarterly.com. Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  4. 4. 4or brand (Exhibit 1). And some 80 percent goals, such as building knowledge aboutof respondents say finding new business potential new markets and informing areasopportunities should have at least some role in of innovation. Respondents from com-determining which philanthropic programs panies with these goals are likelier than othersto fund, compared with only 14 percent who to say business concerns should play a rolesay finding new business opportunities should in determining funding for philanthropic pro-have no weight. grams. Also, their philanthropic programs are much more likely to address at least someIt is notable, however, that some 30 percent of the social and political issues relevantof the responses to the question asking to their businesses; nearly two-thirds say theyabout business goals indicate that some com- currently do, compared with just under halfpanies are trying to reach very concrete of all respondents. Survey 2008 Corporate philanthropy Exhibit 1 of 8 Glance: Exhibit title: Business goalsExhibit 1Business goals In addition to the social benefits of your company’s corporate philanthropy programs, which, if any, of the following business goals does your company try to reach with How successful have you been at those programs? achieving these goals? % of respondents,1 n = 721 % of respondents, n = 638 Enhance corporate reputation 70 and/or corporate brand Extremely, very Build employee and/or leadership successful 44 capabilities and skills 14 Improve employee recruitment 42 and/or retention A little, not at 29 57 Differentiate itself from all successful Somewhat 38 successful competitors Manage current or future risk 19 Build knowledge about potential 16 new markets or products Inform areas of innovation for 15 existing products, services Meet industry norms 12 We do not try to reach any business goals with our corporate 12 philanthropy programs 1Respondents could select more than 1 answer; those who answered “other” are not shown.Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  5. 5. 5What matters, who matters, and where companies are giving insteadExecutives overall say their companies are much Survey 2008 they expect will affect shareholder value thelikelier to address a broad mix ofphilanthropy Corporate local issues most (Exhibit 2). The mix of issues addressedwith their corporate philanthropy 8, part 1 Exhibit 2 of programs than varies across industries and regions, but theto address the social and Glance: political issues that overall difference remains. Exhibit title: Top issuesExhibit 2, part 1Top issues % of respondents,1 n = 721 Of the following social and political issues, which are likely to have the most impact, positive or negative, on shareholder value for companies in your industry over the next 5 years? Developing Top 3 issues Total Asia-Pacific Europe markets North America Environmental issues, including 46 59 53 47 36 climate change Health care, other benefits 27 9 15 17 48 for employees Privacy, data security 24 21 22 15 31 Political influence and/or political 19 18 18 22 18 involvement of companies Demand for healthier or 17 21 14 22 18 safer products Workplace conditions, safety 17 24 20 22 9 Job losses from offshoring 14 14 16 10 15 Affordable cost of products for 14 22 11 19 14 poor consumers Demand for more ethically 14 18 15 18 10 produced products Pension, retirement benefits 13 5 18 7 13 Ethical standards for 13 16 15 11 10 advertising, marketing Demand for more investment 11 16 10 18 8 in developing countries Opposition to foreign 10 10 9 10 10 Survey 2008 freer trade investment and High level of senior-executive Corporate philanthropy 10 6 10 10 10 pay, other compensation Exhibit 2 ofstandards 2 Human-rights 8, part 8 7 7 14 6 Glance: Exhibit title: Top issues 1Respondents could select more than 1 answer; those who answered “other” or “don’t know” are not shown.Exhibit 2, part 2Top issues % of respondents,1 n = 721 Which, if any, of the following issues are you currently addressing with your corporate philanthropy programs? Top 3 issues Education 75 75 66 75 83 Community 58 61 53 56 63 Economic development 52 49 48 61 54 Environment 52 59 55 66 41 Civic, public affairs 51 52 47 59 52 Health, social services 48 42 47 52 49 Culture, arts 47 42 46 54 46 1Respondents could select more than 1 answer; those who answered “other” or “don’t know” are not shown.Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  6. 6. 6 One explanation may involve the interests of improving employee recruitment and retention— employees. Respondents most often cite this are the ones most related to employees and stakeholder group as important in the way their to local communities (ranked second among companies think about their roles in society the stakeholder groups addressed most often). and as the group companies most often address In addition, interviews conducted as part with corporate philanthropy programs of our research into philanthropy3 suggest that (Exhibit 3). Further, companies may be meeting companies see addressing local community other business needs with the programs needs as an indirect way to highlight a com- they fund. The business goals most often cited— pany’s good intentions to groups such as board enhancing the company’s reputation or members, shareholders, and regulators. brand, building employee capabilities, and Survey 2008 Corporate philanthropy Exhibit 3 of 8 Glance: Exhibit title: Employee-driven philanthropy Exhibit 3 Employee-driven % of respondents who selected stakeholder for given category,1 n = 721 philanthropy 50 Employees 45 Local communities 40 35 Stakeholders addressed 30 Organized labor by company’s corporate 25 Nongovernmental philanthropy programs Consumers Shareholders/investors organizations (NGOs) 20 Media and opinion leaders 15 Governments/regulators Board members/ board of 10 directors No particular stakeholder 5 Suppliers 0 0 5 10 15 20 25 30 35 40 45 50 Stakeholders with greatest impact on way company thinks about its role in society 1Respondents could select more than 1 answer; those who answered “other” or “don’t know” are not shown.3 Interviews were conducted with 21 CEO s from around the world between December 2007 and February 2008. The interviews and this survey are both parts of a research collaboration between McKinsey and the Committee Encouraging Corporate Philanthropy. Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  7. 7. 7Similarly, addressing social and political the importance of branding as a business goal,trends and other business needs is not notably that only 22 percent of respondents say thatimportant when companies consider which visibility leading to brand strength plays a roleprograms to fund. Respondents are far less in determining the focus of their programs.likely to cite factors such as alignment with Respondents at companies whose philanthropybusiness needs, stakeholder interests, and even programs include concrete business goals,the ability to leverage the companies’ exist- in contrast, are nearly twice as likely as the fulling capabilities or assets than they are to say group of respondents to say they considerthey base choices on employee interests and the alignment with business needs when focusingpersonal interests of CEOs and board mem- their programs.bers (Exhibit 4). It is particularly notable, given Survey 2008 Corporate philanthropy Exhibit 4 of 8 Glance: Exhibit title: Defining factorsExhibit 4Defining factors % of respondents,1 n = 721 Which 3 of the following considerations, if any, have the most weight in determining the focus of In what areas of corporate philanthropy is your corporate philanthropy programs? the CEO involved? Personal interests of CEO/ Setting overall direction 58 45 board members Employee interest 37 Making specific funding decisions 49 Serving as public face; engaging Local community needs 37 47 in external communications Alignment with business needs 23 Communicating internally 41 High visibility contributing to Acting as role model 38 22 brand strength Facilitating and making sure Stakeholder interest 20 37 resources are in place Highest potential for social impact 19 Executing individual programs 17 CEO is not involved in Corporate tradition 19 6 corporate philanthropy Option to leverage existing 11 corporate capabilities or assets Natural-disaster response 10 Global giving trends 4 Shareholder pressure 4 Competitors’ giving 2 1Respondents could select more than 1 answer; those who answered “other” or “don’t know” are not shown.Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  8. 8. 8What effective companies do differentlyWhatever the business goals of their philan- Still, roughly one-fifth of respondents say theirthropy programs, more than 80 percent companies are very or extremely effectiveof respondents say they are at best only some- at meeting social goals, addressing stakeholderwhat successful at meeting them. Respon- interests, or both. These executives are alsodents are slightly more positive about how well much likelier to say stakeholders are giving theirtheir philanthropy efforts meet social goals companies the credit they deserve (some three-or stakeholder expectations (Exhibit 5). Further, quarters say so). Yet these companies aren’twhile just over half of the respondents say addressing a different mix of issues than others,their stakeholders give their companies the credit and they, too, are more likely to addressthey deserve for their philanthropic pro- the local community with their philanthropicgrams, one out of four don’t know the answer efforts than the community’s importance asto that question. a stakeholder would seem to warrant. Survey 2008 Corporate philanthropy Exhibit 5 of 8 Glance: Exhibit title: Dubious about effectivenessExhibit 5Dubious about % of respondents, n = 721 Slightly,effectiveness To what extent . . . Extremely, very Somewhat not at all Don’t effective effective effective know . . . are your corporate philanthropy programs effective overall in meeting 20 47 23 10 their social goals? . . . are your corporate philanthropy programs effective overall at 48 19 25 8 addressing the concerns of your preferred stakeholders?Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  9. 9. 9Where these companies differ is in how much community needs (47 percent compared withmore they align their philanthropic programs 38 percent) and alignment with businesswith the social and political trends that are objectives (31 percent compared with 23 per-most relevant to their businesses: 71 percent cent) when they decide how to focus theirsay their companies are addressing some corporate philanthropy programs. And theyor all of the relevant trends, compared with are much more likely to collaborate with53 percent of respondents who rate their other companies on philanthropic programsprograms as less effective. These effective com- and to believe that their programs will becomepanies are also likelier to consider local increasingly global (Exhibit 6). Survey 2008 Corporate philanthropy Exhibit 6 of 8, part 1 Glance: Exhibit title: Somewhat relevantExhibit 6, part 1Somewhat relevant % of respondents1 Overall, n = 721 Respondents who consider their corporate philanthropy programs very/extremely effective at addressing stakeholder concerns, meeting Do your company’s corporate philanthropy programs social goals, n = 100 address the global social and political issues that are most relevant to the company’s business? Programs address some or all of most 54 relevant social, political issues 71 Programs address some social, political 21 issues, but not most relevant ones 12 Programs do not address most relevant 13 social, political issues 8 1Respondents who answered “don’t know” are not shown.Jan 2007 McKinsey Quarterly survey on corporate philanthropy
  10. 10. 10 Survey 2008 Corporate philanthropy Exhibit 6 of 8, part 2 Glance: Exhibit title: Somewhat relevantExhibit 6, part 2Somewhat relevant % of respondents Do you expect your company’s corporate philanthropy programs to become increasingly global, either by trying to affect global issues or by operating in a larger number of countries, over the next 5 years? Respondents who consider their company’s philanthropy programs very/extremely effective at addressing stakeholder Overall, n = 721 concerns, meeting social goals, n = 100 Don’t know 1 Don’t know 9 No 34 51 No 40 65 Yes Yes Overall Respondents who consider their corporate philanthropy programs very/extremely effective at addressing stakeholder concerns, meeting social goals If no, why?1 If yes, why? Our corporate philanthropy programs Our corporate philanthropy programs 54 77 do not need to operate globally will try to affect more global issues 52 Our corporate philanthropy programs Company expects to have business already operate globally or in as many 9 operations in more countries; 54 philanthropy programs will follow 70 geographies as we want them to Other 12 Other 9 16 1Respondents who consider their company’s corporate philanthropy programs very/extremely effective at addressing stakeholder concerns, meeting social goals are not shown, because base is too small to be statistically significant. Q Contributors to the development and analysis of this survey include Sheila Bonini, a consultant in McKinsey’s Silicon Valley office; and Stéphanie Chênevert, a consultant in the Seattle office. Copyright © 2008 McKinsey & Company. All rights reserved.Jan 2007 McKinsey Quarterly survey on corporate philanthropy

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