My June 12 blog examined the changing objectives of IBM’s Corporate Philanthropy programs and how the company is redefining its priorities to better align with the company’s business strategies. This blog looks at some of the ways the company is attempting to maximize and measure the returns of its charitable investments.
The Business Value of Social Investments
IBM, as I discussed in the previous blog, is increasing its social spending and aligning this spending around new priorities. Now that it has come to view these expenditures more as investments than as gifts, it is focusing growing effort both on maximizing and measuring the returns they generate—the returns both to society and to IBM and its stakeholders.
It is, for example, increasingly channeling these investments into defined programs that can be applied, replicated, and scaled worldwide. For example, as I explained in detail in my 2010 reports on IBM’s Academic Initiative and its Corporate Service Corps initiatives, it has:
- Developed a formal, global program to help universities more easily and effectively partner with IBM to address their needs in areas including technology access and implementation, curriculum development and course design as well as to share best practices with other universities (while simultaneously increasing IBM’s involvement in cutting-edge research projects and identifying and building relationships with promising students); and
- Created a structured, rapidly expanding program, modeled loosely on the Peace Corps, to help emerging countries, cities and communities identify and implement solutions to critical development and other societal problems (while simultaneously contributing to and reducing the cost of IBM’s executive development efforts and demonstrating the value of, and sometimes creating demand for the company’s Smarter Planet solutions).
IBM is even programitizing programs as individualized as employee community volunteer activities. Although employees are certainly free to (and can qualify for IBM matching funds) select the type of causes to which they will contribute their time and money, IBM’s On Demand Community program is creating a line of proven, Web-based management solutions that volunteers can deploy in schools and other not-for-profit organization and agencies.
Increasing Social Leverage
This, however, is only one example of IBM’s use of in-kind contributions. Although the ratio of in-kind to cash contributions has increased relatively modestly over the last five years (from an already large 2.8:1 in 2005 to 3.6:1 in 2009), its contributions of IBM’s technologies has grown from $64 million to more than $102 million. These contributions range from entry-level servers used in classrooms and on-line delivery to supercomputers for research organizations and a broad range of hardware and software used to manage the day-to-day operations of all types of educational and non-profit organizations. There has been a particularly rapid growth in the software given for universities to use in post-secondary classroom education through IBM’s aforementioned Academic Initiative.
Although services represent only 23% of the company’s total contributions, they have the potential of delivering disproportionately high levels of value. After all, while IBM certainly produces products, its primary value is in its people. They embody not only IBM’s expertise (in technology, business, science, mathematics and dozens of other disciplines), but also the company’s commitment to innovation and excellence.
Although most of the services that IBM donates are in the form of technical services (as in helping organizations evaluate their IT needs and implement appropriate solutions), a growing percentage will come from Web-based on-demand services, such as the On Demand Community management solutions mentioned in my previous blog, and its Small Business Toolkit, which entrepreneurs can use to learn and implement effective business practices. The range of such online service offerings will certainly increase as IBM expands its cloud service offerings and its Lotus family of collaboration and social networking tools.
The greatest value, however, promises to come from a growing number of programs that contribute professional services. These include management consulting services from the company’s Global Business Services group and the broad-based services provided through the company’s Corporate Service Corps, and more recently created Executive Service Corps programs. Then, of course, there are the less programmatic contributions, such as the contributions of IBM scientists and medical doctors to organizations including the National Academy of Sciences and a rapidly growing number of partnerships with universities. Examples include partnerships with the University of Missouri on a cloud-based genomic research solution and the City University of New York on electronic textbooks and an Analytics Center of Excellence.
But while IBM certainly created and manages many of its own philanthropic endeavors, it also understands that many specialized Non-Governmental (NGO) and Community-Based Organizations (CBO) are better suited to delivering many specialized and on-going services than is IBM, can better service the needs of remote communities and can more effectively scale programs that IBM has created. It, for example, relies on partners including Digital Opportunity Trust and CDC Development Solutions to organize its Corporate Service Corps engagements and is now working with the U.S. Agency for International Development (USAID) to expand the CSC model to facilitate participation by many other companies, international organizations and foundations. The company also partnered with the World Bank to create the Small Business Toolkit, which can entrepreneurs use to learn and implement effective business practices.
Assessing the Benefits
As of now, there are no generally accepted principles for precisely measuring either the social or the business benefits of corporate philanthropy. Although business consulting firms like McKinsey and BSG, and social consulting firms like FSG and BSR are certainly working on such measures, corporations currently use their own measures. IBM, for example, cites benefits including improvements in:
- IBM’s brand, including frequent write-ups in business periodicals and books by thought leaders, such as Rosabeth Moss Kantor (in her 2009 book, SuperCorp;
- Talent recruitment, morale and retention attributable to the opportunity to contribute to society and pride in working for a company that encourages, enables and is known for these contributions;
- Entry into new, and expansion into nascent markets, such as Vietnam and Nigeria, in which IBM has conducted philanthropic programs;
- Tuning and demonstrating the capabilities of IBM technologies to new needs, such as its cloud-based World Community Grid and its work with the open source Sahana disaster planning and recovery application; and even improvements in IBM’s
- Share price, by attracting investments from the growing number of social investment funds (SIFs).
Sound a bit squishy? Perhaps, but each of these improvements is being measured with varying degrees of specificity. Although IBM does not subject proposed social contributions to a strict ROI justification, the company’s Corporate Citizenship & Corporate Affairs organization does calculate estimated returns and reports them to the company’s Corporate Citizenship Steering Committee and Board of Directors.
IBM, for example, either directly collects or contracts for data across a range of areas. These include:
- Brand: IBM collects information on all of the media coverage of its CSR programming and assesses the value of it from mainstream media coverage (i.e. Wall Street Journal feature on the Corporate Service Corps or Fast Company coverage of World Community Grid) It also collects data on other “free publicity” in social media and electronic media. This is extensive and easily measurable.
- Talent: IBM uses its own metrics to gauge the value of its CSR programs in the retention of top talent and its impact on recruitment and retention of talent. One publicly available example is Harvard Business School professor Chris Marquis’s study of IBM’s Corporate Service Corps, which assessed the program’s impact on factors including employee skills development, employee commitment to IBM and impact on local partner organizations and communities.
- Finance: IBM tracks the degree to which Socially Responsible Investment Funds increase or decrease their purchases of IBM’s stock based on its CSR performance and the degree to which independent rating entities, such as Ceres or Covalence (both of which rank IBM #1) rate IBM highly.
- Technology: Since many of its programs involve the use of critical IBM technologies such as cloud, analytics, grid, voice, digital imaging, IBM can track both new patents and the ability to obtain intellectual property or value for its technology innovations in the marketplace.
- Geography: Most companies contribute the lion’s share of their CSR investments in major markets and in areas where they have most of their employees or clients. IBM, on a percentage basis, is the largest contributor to so-called Growth Markets and is able to track the impact its investments on business opportunity and key relationships.
All combined, these 5 areas have relatively specific measurements that permit the company to assess the ROI of its CSR investments. The company, of course, continually modifies and improves these measures over time. Although IBM Vice President of Corporate Citizenship & Corporate Affairs, Stan Litow, certainly acknowledges the subjectivity of some of these assessments, he insists that the exercise is necessary. After all, philanthropic programs must be sustained if they are to deliver long-term value. The only way to ensure sustained support for such programs, in bad economic times as well as good, is to demonstrate that they deliver strategic value to the organization.