In today’s society businesses are challenged with the task of maintaining profitability and community accountability simultaneously
In today’s society businesses are challenged with the task of maintaining profitability and community accountability simultaneously. Companies can use their charitable activities strategically since it results in all parties involved benefiting. Employees are positively influenced from their philanthropy along with the beneficiaries in the communities. There are typically four common types of corporate philanthropy efforts used by different firms. The approaches are peripheral philanthropy, constricted philanthropy, dispersed philanthropy, and strategic philanthropy (1).
Companies that practice peripheral philanthropy have charitable programs that are mostly motivated by external factors and stakeholder expectations as the core of the corporate philanthropy. They are firms with a high market orientation and a low competence orientation. These firms regard corporate philanthropy as a means to better situate themselves in their competitive business market. They work on achieving a positive reputation in order to increase their bottom line. Peripheral philanthropic activities are often unrelated to a company’s core proficiencies and instead focus on their public image. Many firms may engage in charitable activities in a variety of fields with contributions that cynics may claim are insincere.
Firms on the other hand, with a high focus for competence orientation and low for market orientation is known as Constricted philanthropy. This configuration of corporate philanthropy is designed to increase the proficiencies of the company by addressing the needs of internal stakeholders and does not take the needs of external stakeholders into consideration. Charitable efforts used by various firms may not address the most pressing social needs and could potentially be viewed seen as irrelevant or unessential. The connection of the company’s business and philanthropic activities may result in the alienation of stakeholders since they may feel their needs are not being met. An example of this is the construction tool manufacturing company Hilti Corporation (2). They donated several containers of construction materials to help with the cleanup effort at Ground Zero after the terrorist attack of September 11, 2001.
Dispersed philanthropy is not oriented towards external stakeholder needs or internal business demands, but is determined mostly as a result of managers’ interests. This corporate philanthropy approach is characterized by low market and low competence orientation. Many initiatives are largely uncoordinated leaving neither executives nor regular employees with a comprehensive understanding of the company’s activities or clear decision measures explaining why specific charitable projects are chosen. These firms may engage in a variety of small projects without any particular guiding theme as a result. Funding is usually spread indiscriminately across various organizations in differing areas. Neither external stakeholder needs nor internal business considerations guide the company’s philanthropic engagement. Similar to constricted philanthropy, actions taken run the risk of being misunderstood and viewed as ineffective by both internal and external stakeholders.
The last of the four types of corporate philanthropy is known as Strategic philanthropy in which firms have a high level of commitment from both market and competence orientation. This approach is considered to be the most effective because it integrates both internal and external issues. The same professional management principles are applied in this approach to corporate philanthropy as to other business operations. Top executives align philanthropic efforts with the core competencies of their firms, in effect utilizing the company’s abilities to benefit society. Additionally, they also take consider stakeholder along with market expectations resulting in both social and economic benefits. Companies with this type to corporate philanthropy are successful in achieving sustainable results regarding both the needs of their stakeholders and their own success.
Some companies are able to achieve much more than others with their corporate philanthropy programs. The responsibility and implementation for corporate philanthropy should be combined with the management’s responsibility in a company to maintain a serious corporate social engagement. Strategic guidance for corporate philanthropy should not be handled by lower-level staff only. Instead top management should share in this responsibility. As discussed above, by using one of the four types of corporate philanthropy companies can strategically use their charitable activities to create a positive opportunity for themselves and for the community that they are helping.