Beyond charity: The business of philanthropy

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As philanthropy becomes more businesslike, some businesses are becoming more philanthropic.

Cameron Calkoen, founder of Carabiner, a Vodafone-supported mentoring scheme that helped Jordon Milroy, right, climb the Sky Tower to raise money for wheelchairs in Samoa. Photo / Greg Bowker
Cameron Calkoen, founder of Carabiner, a Vodafone-supported mentoring scheme that helped Jordon Milroy, right, climb the Sky Tower to raise money for wheelchairs in Samoa. Photo / Greg Bowker

When Cameron Calkoen first applied for World of Difference funding he was turned down with the same polite letter two years in a row.

The former sprinter, who has cerebral palsy and has represented New Zealand at international championships for athletes with disabilities, took the rejections as a challenge.

"I'm a competitive person so I just kept going back to the drawing board, asking myself: 'What does this need to look like in order to be successful?'''

Eventually, in 2009, Calkoen's proposal - called Carabiner, a scheme matching mentors with young people with disabilities - was good enough to get an interview. In the first phase he was up against 20 applicants who were whittled down to a shortlist of 10. In the second interview, a panel selected just six.

"It's like the TV programme Dragons' Den. You've got to sell your project and you've got to sell yourself.''

Welcome to the competitive world of philanthropy, business-style. It may be more blessed to give, but receiving isn't always easy. World of Difference, now in its tenth year, is a home-grown programme developed by the Vodafone New Zealand Foundation and subsequently adopted as the corporation's signature philanthropic endeavour.

The scheme pays a year's salary and expenses for individuals who work with a youth charity, developing their proposals to make a difference.

Individual businesspeople have long been a part of New Zealand's philanthropic landscape - Sir John Logan Campbell, Sir John McKenzie, Sir Stephen Tindall to name a few. But giving by companies which expecting nothing concrete in return is relatively rare and new.

Research from Businesses and Economic Research Ltd (BERL), commissioned last year by Philanthropy New Zealand, an organisation of trusts and foundations, puts business giving at $150.8 million, excluding sponsorship. That was up from $89 million in 2006 but down in percentage terms, from 7 per cent to 5.7 per cent of total philanthropic funding in New Zealand. In the big picture it's a drop, perhaps a slosh, in the bucket.

The Vodafone example does, however, promote the idea of business giving and expecting nothing back. "It's a good thing. It's good. It's right,'' says Vodafone NZ human resources director and chair of the Vodafone Foundation Michael Stanley. Vodafone worldwide has always had a philanthropic arm, he says, based on the principle of investing in the communities in which it operates.

"It's not a business case investment. But if you take one step back from that, the proposition that it is right for corporates to seed social innovation and to foster programmes that build stronger, healthier communities is intuitively right and a sensible thing for corporates to do."

The hardest part of his job is the selection process.

"Last year we got 150 applications and you bring it down to six or seven. I'd say conservatively somewhere between 30-50 of those you could easily fund.''

Vodafone's philanthropic budget in New Zealand is around $1.5 million, with half coming from the local operation and half from the global head office.

But last year giving ballooned as a consequence of the Christchurch earthquakes, which saw Vodafone raise $750,000 from its customers through text giving, as well as contributing $2 million to the Canterbury Recovery Fund. In the context of Vodafone NZ's $151.5 million profit on revenue of $1.69 billion in 2011, the Foundation's annual budget is hardly largesse, but it does give an indication of the corporate philanthropic mind - in this case, valuing its contribution towards a healthy community at 1 per cent of profit.

But while budgets may be small, business giving aims to compensate with its impact. This is philanthropy beyond charity or patronage - an endeavour that borrows business concepts and variously describes itself as "strategic", "effective", "systems-change", "catalytic" or "venture" philanthropy - and which wants to change the world.

Hence, in the case of the World of Difference scheme, the rigorous selection and evaluation process, as well as an induction programme, monthly updates and ongoing involvement.

"One of our key advantages is we can support and seed ideas that would never get funding from any mainstream funders'', says Stanley, pointing out the inherent riskiness of the scheme's approach. "You are backing someone's heart and soul, their initiative and
innovation."

Despite the risk, Stanley claims a high success rate for the 56 individuals funded to date. "I can only think of two programmes that had fundamental problems with them."

For Calkoen, as well as giving him the opportunity to realise his dream, the most valuable aspect of the World of Difference scheme was Vodafone's hands-on support and the network of contacts and collaboration. Each year the company pays for a two-day live-in hui for the scheme's current and past recipients.

"You want to keep meeting up because you get energy from each other,'' says Calkoen. "It's good to meet others who are working hard to do some good in the community because sometimes that can feel like quite a lonely project."

Three years on Carabiner, which operates as part of Yes Disability, is still going, having secured funding from others including the Lion Foundation and the Tindall Foundation to continue its work. It provides volunteer mentors for 30 to 40 young people with disabilities a year.

Examples include communication student Josh Aislabie matched with Bill Francis of the Radio Network to help in his goal of becoming a radio presenter; architect Pip Cheshire taking on 26-year-old architectural draftsman Jared Seymour as his protégé; and Tim Lythe, who coached Jordon Milroy to climb the stairs of Auckland's Sky Tower as a fundraising effort to buy wheelchairs for people in Samoa. Calkoen was awarded an AMP "Do your Thing" scholarship last year to promote Carabiner worldwide.

On the world stage New Zealanders appear to be a very generous bunch - giving a total $2.67 billion last year according to BERL's survey. That equates to 1.35 per cent of GDP, second only to the United States which gave US$290.9 billion or 1.98 per cent of GDP. In GDP percentage terms, New Zealand's giving was significantly more than Australia (0.68 per cent) and Britain.

New Zealand's generosity is recognised in other surveys too, such as the World Giving Index, which uses survey questions asking people whether they had given money to charity or volunteered or helped a stranger in the past month. New Zealand and Australia top the list.

The most significant feature of the 2011 BERL survey, however, is the more than doubling of giving since 2006, when the total was just $1.27 billion, or 0.81 per cent of GDP.

The biggest mover was personal giving, which increased from to $433m (35% of the total giving) in 2006 to $1.55 billion (or 58% of total) in 2011. Suddenly, individuals were giving more than ever before, the bulk of it - 92 per cent - from donations.

The increase is partly explained by the removal in 2009 of the cap which had limited the 33.3 per cent tax rebate for donations to $630. The main effect of lifting the cap was a boost in the amount given, rather than the number of people giving.

Businesses were also able to take advantage of the new tax rules and give more. "In our case, we added 33 per cent to the donation to the Todd Foundation,'' Sir John Todd noted in his speech to the Philanthropy NZ conference in 2009, referring to what Todd Corporation companies gave to the Todd family's philanthropic organisation.

"This had the same net impact on our business earnings and allows us to at least maintain and possibly increase the level of grant-making this year."

New Zealand's surge in personal giving is also undoubtedly due to the human propensity to help out others in times of adversity. The BERL report says the increase reflected "the giving spirit and sympathy of people across New Zealand (and the globe) for the residents of Christchurch'' following the earthquakes of September 2010 and February 2011.

The report picked up a notable spike in payroll giving in March 2011, with some 3,690 joining that month, each giving around $100 on average, resulting in $360,000 of donations for Christchurch. Payroll giving, which was introduced in January 2010, enables donors to give to chosen registered charities and immediately be credited with the 33.3 per cent rebate rather than claim it annually.

What's not so clear is whether the surge in personal giving will be sustained and whether it reflects the rapidly expanding world of online giving or "crowd funding'' through sites such as Kickstarter and Please Fund Us. There are plenty of signs that New Zealanders have embraced the online giving mechanism.

The Arts Foundation is currently building Boosted, a crowd funding site that aims to raise $2 million a year in new funding for arts projects. Jasmine Social Investments, the philanthropic venture set up by Trade Me founder Sam Morgan, which funds "entrepreneur led organisations targeting big problems with a market-based approach", is also very focussed on the online world.

Organisations it funds include Kick Start and People Improvement which have online giving at the centre of their operation. Then there are people like scientist Siouxsie Wiles who used RocketHub to raise $3000 in 15 days to help her with her scientific research.

Some businesses were also seen to be generous towards the Christchurch recovery effort. That included over $6 million from both Fonterra and Fletcher Building, $2 million from Vodafone (half of which came from head office) and $1 million-plus donations from Todd Corporation and several banking corporations.

What's harder to fathom is why personal giving increased so much while business giving, in percentage terms, has remained static. Why, when personal generosity has blossomed, has the business sector, in percentage terms, remained so stingy?

"Businesses would argue they are fighting to stay in business at the moment, so it makes philanthropic giving difficult,'' says Philanthropy NZ chief executive Robyn Scott. "We would argue there is compelling evidence to suggest that employees prefer to work for a company that demonstrates it is a responsible participant in the community and supports that community.''

She acknowledges that the volatility of investment markets following the global financial crisis has had a direct impact on how much money can be given away, with many endowment funds having suffered spectacular losses. But Scott also notes there is an inverse relationship between people who give and people who can afford to give. "People on lower incomes give a proportionally higher amount than people on high incomes.''

She says comparisons with US philanthropy aren't particularly relevant because of the absence of an equivalent to the New Zealand welfare system in the US, but believes there is an opportunity for the local corporate world to show more leadership. "It would be fabulous to hear business leaders in New Zealand speak with pride about their giving and their employees' giving that they are supporting in the way you hear United States philanthropic leaders speak about it.''

But the key reason why New Zealand's giving is higher than elsewhere is because of the unique presence of so many statutory trusts in our philanthropic landscape. The trusts, the unsung by-product of the free market reforms of the 1980s and 90s, came about through the privatisation of the trustee savings banks and restructuring of the electricity industry.

Last year the statutory trusts, which include gaming machine societies and the Lottery Grants Board, gave $687.9 million in grants - 25.8 per cent of the country's total giving.

In contrast, voluntary family, individual and university trusts and foundations gave 10.6 per cent or $282.7 million.

"Nowhere else in the world has the corpus [capital] from the sale of publicly owned assets been spent for public good,'' says ASB Community Trust chief executive Jennifer Gill. The BERL report shows that the 12 community trusts, with combined capital assets of $3.0 billion, granted around $103.2 million in 2011 - a decrease of eight per cent from the 2006 figure. In ASB Community Trust's case, capital plus reserves stands at $1.072 billion, almost back to its high of $1.095 billion in 2007, enabling the trust to distribute $40.9 million to community organisations last year.

Like most endowment funds, the ASB Community Trust fund suffered in the wake of the global financial crisis, dropping 18 per cent ($200 million) two years ago, resulting in just $16 million of grants in that year.

As Gill points out, unlike some family or individual foundations, these are in-perpetuity trusts. To ensure the capital is preserved for future generations, reserves have to be topped up regularly to keep up with inflation. Last year, for example, the ASB Community Trust added $37.5 million to its reserves and as a result of the recent savaging of its investments, has changed its investment practice to "smooth out the bumps and ensure that one-off events do not have an instant negative impact on grants.'' Budgets are now based on a percentage of the five year moving averages of the fund's value.

Gill says that, like other foundations, the ASB Community Trust has also gone through a significant re-evaluation of its grant-making and is increasingly adopting "an evidence-informed approach'' to be more effective. That involves commissioned research, inviting expressions of interest and more rigorous evaluation of applicants.

Signalling the new direction was its Maori and Pacific Education Initiative, which has set aside $20 million to improve the educational outcomes for Maori and Pacific students.

In the first phase of the project, which involved $11.2 million of multi-year grants, Gill says there were 307 expressions of interest. "We took 37 to the second stage and we funded even. What you end up doing is funding a smaller number of groups, funding them well and funding them usually over a number of years.''

Evaluation is also a key component. "You talk with them right from the very beginning about what the outcomes you expect from this and how we area going to measure it.''

Gill says the more proactive approach has developed through the realisation that funding is often addressed in isolation from the social context - something she saw first-hand while working for the JR McKenzie Trust in the 1980s. "We used to sit around with this vast pile
of applications and all you were doing was saying: 'They've asked us for $50,000; should we give them $5000 or $10,000?' There had to be a better way.''

There was - developed initially by recognising patterns in applications and, although the term wasn't in vogue at the time, by realising philanthropy could have a catalytic effect in developing social programmes. Gill refers to the pioneering support Sir Roy McKenzie gave to the development of programmes for the deaf, Women's Refuge and the hospice movement. "What Sir Roy McKenzie started doing and Sir Stephen Tindall followed in his footsteps about a decade later was to ask: 'What are some issues that we should be addressing more seriously?'''

Similarly the Todd Foundation, which was formed by the Todd family when it sold its Europa oil importing and petrol retail business to BP in 1972, has also changed tack in its giving.

"We were part of the scattergun school of grant-making,'' Sir John Todd told the Philanthropy NZ conference in 2009, explaining that for a decade the ain fund has given fewer than 40 grants a year, with the average grant growing to almost $50,000. "This is better, but because most grants were for one year, we found we had graduated from scattergun grant-making to the 'hit and run' school of grant-making, with no continuity for grantees and little time for follow up or evaluation before the next funding round was upon us.'' That led to further modification of policies to allow for multiple year programmes to cover ongoing needs, which was modified again in 2009 to "partnership funding''.

Last year the Todd Foundation, which has total funds of about $17 million, gave away $4.8 million in grants. That was in a year when, as executive director Kate Frykberg points out, "demand way exceeded supply'', with some $16 million in grant applications received.

"There is a lot of community need at the moment. We've got growing inequality and government budgets which aren't expanding.''

Frykberg says the partnership model came about from US research which found three problems with funder practices aiming to support positive social change. Funding was too short term and too tightly prescribed, and funders didn't have a strong enough relationship with the people being funded.

The approach adopted by the Todd Foundation in the area of child and family advocacy turned the traditional funding model on its head - beginning with the Foundation doing due diligence on organisations it felt were doing good work in the sector. Four - Every Child Counts, Great Fathers, Jigsaw and Ririki - were invited to apply for funding and each was given untagged grants of up to $100,000 a year for five years. Recipients and Todd Foundation staff and trustees attend a two-day retreat each year.

The aim, says Frykberg, is to learn together, build leadership and strengthen relationships. "Giving grantees free rein with substantial long-term funding has required courage and a level of trust,'' says family trustee Georgina Ralston in the 2011 annual report. ``It's the opposite end of the spectrum from how we once funded.''

Scott Gilmour, who started the I Have a Dream charitable trust in 2002, is another who strongly believes in "engagement philanthropy'' to change the system. "It's not just about writing a cheque,'' he says. "It's about being involved, working with the staff and volunteers, and learning more about the issues at the coalface.'' But Gilmour did write a cheque worth several million from the proceeds of the sale of a software company he co-founded in the US.

The scheme, based on the US I Have a Dream education support programme, saw Gilmour commit to sponsor a group of children, almost all migrants from Tonga, Samoa, the Cook Islands, Fiji and Ethiopia, and most from a decile-one school in Mt Roskill. Now in its tenth year, the scheme, which began at year four and has involved as many as 53 children, has its "Dreamers'' about to finish secondary school.

It is showing positive results, with more students achieving Level 3 NCEA and eligible for University Entrance, compared with a control group of their peers - the evaluative research having been built into the programme's costs. Those Dreamers who do make it to tertiary education will have their fees paid for the duration of their course.

But perhaps the most significant aspect of Gilmour's philanthropy is that it has highlighted inequalities in our education system and an inherent soft racism of low expectations. The research showed the educational pathways many students are channelled into at year nine make it almost impossible for them to progress to higher education.

"It's an intensive long term project to overcome those disadvantages, but if you do - and this is the whole point of the I Have a Dream programme - we will stop the cycle of poverty in those families forever,'' says Gilmour.

As of last year the Trust's endowment fund sat at about $1 million - the intention being that it will be used up when the Dreamers finish tertiary education. The fund took a big hit in the global financial crisis, but Gilmour was able get some top-up funding from the Ministry of Social Development and ASB Community Trust to ensure he can complete his project.

"Our costs are easily covered by the gains that we see - just keeping one or two kids out of jail pays for our costs,'' says Gilmour. "In the United States, I Have a Dream is now showing an $8 return for every dollar invested. In time I think we'll see that here.''

A good return on investment - although arriving at such a figure no doubt requires some complex assumptions. But examples such as Gilmour's show that applying business rigour to social needs can produce creative solutions. And that in the business of giving, making a profit can make way for making a difference.

- NZ Herald

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