Why Donating Makes Good Business Sense

Donating a corporation’s funds or employee time to a good cause is one way a business can choose to align itself with social issues or adapt a point of view. Decision-makers may find that these charitable actions make them feel good about the power and profits possessed by their organizations, but do they add any value to the company’s ongoing operations? Can companies devoted to having positive outreach initiatives surmise that these actions are getting them ahead in their industries?

Research over the past few years has revealed that there are indeed advantages for socially active leaders and their businesses. The concrete advances in consumer and employee perception have come at a time when companies are more accessible than ever before. Leaders and their brands are visible and reachable through platforms such as media, potentially heightening the connection between individuals and businesses.

Using company resources for charitable purposes can affect a great number of aspects of a business’s performance, from its ability to reach young employees to the way viewers perceive its products. Leaders that are considering charitable initiatives should consider the following 5 benefits associated with good corporate citizenship.

Donations Boost Perceived Product Quality

Generosity casts a company in a favorable light, and this positive feeling extends to its product line. A study published in the Journal of Consumer Research revealed that today’s shoppers apply morals to their commercial decisions. When a company is known for donating to good causes, a process that researchers call the “benevolent halo effect” occurs.

The research concluded that many different variables of perception change when a company’s charitable efforts are mentioned. Wine given to test subjects tasted better, running shoes were found more satisfactory – even processes such as hair loss prevention and teeth whitening seemed more effective.

While the researchers noted that there has been some doubt among corporate leaders that charitable giving truly affects perception of a company, they offer their efforts as a counter-example. Leaders following this model can put company funds toward positive causes, buoyed by the confidence that their own operations will stand to benefit from these exertions.

The studies also found that some ways of announcing charitable efforts are better than others from a business effectiveness perspective. For instance, using social responsibility as a marketing linchpin weakened the benevolent halo effect. When charitable contributions are announced front-and-center in an ad campaign, shoppers may see them as marketing first and generosity second. Fortunately, ads are far from the only way to reach an audience today: Social media and other direct communication methods are great ways to exchange ideas with the public.

Millennial and Generation Z Appeal

Companies that make charitable contributions may have more success hiring young workers and increasing employee retention than those that don’t take these actions. This is an important consideration because while pleasing consumers is a more direct path to value for businesses, employee satisfaction plays a huge part in determining whether organizations thrive or flounder.

According to Cone Communications research, members Generation Y and Z value charitable activities in a potential employer. Considering the fact that these younger generations are becoming the backbone of the workforce, it makes sense for business leaders to be increasingly sensitive to their wants and needs. As it happens, young workers are values-driven, and prefer to work for organizations they can be proud of.

According to the latest Cone research, Generation Z is made up of individuals with a “mature perspective” on company responsibility. While being good to employees is the most popular mark of a top employer, an overwhelming majority of Gen Z individuals – 89 percent – stated that it’s important for companies to make charitable donations within their communities. A more general sense of helping people and the environment is even more popular, with 91 percent endorsing this idea.

How do Generation Z perceptions of company quality stack up to those of their slightly older Generation Y, also known as millennial, brethren? According to Cone, there is little difference in opinion. The same percentage of millennials, 91 percent, believe that moral companies are ones that assist people and protect the environment, while 90 percent like businesses to donate to good causes, 1 percent more than among Generation Z.

The Hiring Stakes

Putting the above ideas about responsible companies into a more specific light, 2016 Cone Communications research asked millennials how they felt about being employed by a company that is engaged in responsible corporate citizenship. The response was loud and clear: More than half, 64 percent, stated that they didn’t want to work for a company with no social responsibility plan. This is a marked contrast to the 51 percent average among Americans regardless of age.

Across related metrics, the answers were similar – 76 percent of millennials stated that corporate commitments to good causes are among the factors they consider when selecting an employer, and 75 percent stated that they would work for a more socially active company, even if a less charitable firm was offering more money. Compare those figures to the respective 58 and 55 percent among all age groups and it’s clear: Young people are prioritizing employers that make positive strides in their communities.

Frontiers in Philanthropy

A Raconteur report on corporate giving found that there is a general public distrust of large companies. Focusing on U.K. organizations in the wake of the global financial crisis, researchers found that people are largely unaware of the fact that many of these businesses do give large sums to good causes. Raconteur’s Dina Midland pointed out that firms can turn their attention to some of the efforts cutting-edge businesses are using to get the word out about their positive contributions.

For example, there are opportunities for companies to work together, or to use more advanced and high-tech methods to determine where their contributions are most needed. These methods and more will allow firms to not just give money, but make sure that their dollars are having the maximum possible effect. Carefully coordinated charitable giving may prove that the efforts are not token, but intended to create real change.

The Giving Department Director Steve Wickham told Raconteur that companies should approach charity with long-term strategic ideas, and create long-term connections. In an era when people are more aware of corporate actions than ever, yet often distrustful of companies’ motives, active and well-considered charitable works are the best way forward.

Creating value for a company today is quite different than it was even a few years ago. While the end goals of success within a particular market and sustainable growth never really change, technology and attitude evolution have caused new practices to rise in importance. Individuals who aspire to lead should take their examples from what’s going on today in the corporate world, rather than an unchanging set of principles.

The practical nature of Maryville University’s Master of Business Administration (MBA) degree sets the program apart. Designed by and for people deeply embedded in today’s business climate, the program focuses on real-world knowledge. From human resources to project management and beyond, the curriculum is designed to create well-rounded executives who are ready for 2017′s unique challenges.

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