Giving, and getting by in Cleveland Featured

7:04am EDT November 26, 2002
Americans gave an estimated $212 billion to charity in 2001 -- the second highest amount on record, according to a report by Giving USA.

Of that $212 billion, approximately 4 percent -- $9 billion -- came from corporate contributions and corporate foundations, representing about 1.3 percent of corporate pretax profits.

Cleveland and Northeast Ohio have done their fair share, and perhaps a bit more, to contribute to that total, now and in the past. In fact, according to a study by the Urban Institute, the Northeastern part of the United States has one-fourth of the nation's nonprofits but holds one-third of assets and public support dollars.

Cleveland has an impressive history in the nonprofit world. Besides an historically generous group of individuals, it has one of the oldest and richest private philanthropic foundations in the Cleveland Foundation; a group of well-funded museums; one of the first United Way chapters; and one of the highest-funded Catholic diocese in the country.

In fact, in the early '90s, Ohio ranked fifth in the nation after California, New York, Pennsylvania and Texas in the number of nonprofit organizations. Ohio also ranked eighth in public support dollars, sixth in total expenses and sixth in total assets.

But some of the factors surrounding Cleveland's generous reputation are changing. As a region, we are losing corporate headquarters, a big source of philanthropic giving; the economy is lagging; stocks are down; and tax revenue is declining. As a result, some organizations are receiving less.

When economic indicators grow more slowly or fall, so does the rate of growth in giving. In 2001, taking into consideration the rate of inflation, giving decreased by 2.3 percent.

That decrease may be relative, however, since in the previous few years, many larger charities had experienced double-digit increases in donations. Other than in 1987, the total amount of giving has increased every year for the past 40 years. And while the rate of growth has varied from year to year, each year Americans have given more than in the previous year.

However, taking into consideration one-time donations and those collected as a result of the attacks Sept. 11, even big charities like The Salvation Army and The American Red Cross experienced only small gains or even declines in funding last year.

One problem is that with stock market declines, wealthy individuals no longer have the need to offset or gift stock to achieve a tax benefit. Another problem is that estimates by the National Conference of State Legislatures show the shortfall between available tax revenue and budgeted spending will be $58 billion in 2003 for all states, up from $37 billion in 2002.

That shortfall is even more significant because the number of public charities grew between 1989 and 1994 by 6.3 percent. So there is less money, more organizations and a greater emphasis on community giving.

According to a Roper survey, consumers are becoming more aware of corporate image and buying accordingly. Part of that image is tied into a company's relationship to the community that supports it. Consumers are showing new loyalty toward local companies, but they expect them to give something back.

"Consumers will pick one brand over another," says Barb Brown, principal and co-owner of BrownFlynn Communications. "The notion that this (corporate giving) is a soft issue and therefore the downturn would limit resources hasn't played out. In the wake of Enron, we see this is a topic that is not going to go away and has been rising to the top."

Corporate leaders and employees seem to be up to the task. According to a joint survey sponsored by SBN and BrownFlynn Communications, 100 percent of respondents believe that community relations is important to a company and that businesses have a responsibility to give back to the community.

But giving back takes many forms and can mean different things to different business. And with increasing limited resources, many companies are re-evaluating how, when and where they give.

"Companies in Cleveland want to be good corporate citizens," says Margie Flynn principal and co-owner of BrownFlynn Communications. "(However) the questions is, what do they want to be known for?"

Although 86 percent of respondents said they engage in corporate giving because of "a desire to give back to the community," 77 percent look at community relations as a way "to enhance their image" and 45 percent participate to "gain publicity."

With shrinking budgets and increasing need, businesses are looking at ways to maximize charitable contributions. Flynn and Brown refer to it as strategic philanthropy, or cause marketing; the idea is to take an organized approach to contributing.

"What is important is not to look just at what you give in money, but what board you sit on, what you sponsor, and make sure that the outreach is aligned with the business," says Flynn.

Fifty-eight percent of the survey's respondents said they receive up to 300 requests a year for charitable donations; 37 percent receive between 300 and 600 a year. Seventy percent said they give to between one and 100 organizations each year.

"It is vital to have a strategy for giving in order to eliminate requests and to say no to ones that are not aligned with the company," says Brown.

Fifty percent of respondents said the focus for community giving is "tied in to our mission." "By priority" and as a result of "employee involvement" were some of the other approaches.

When asked what areas businesses focus on, respondents cited education first, followed by community and economic development, human services and youth. That mirrors national averages -- roughly three-fourths of public support money goes to three types of nonprofits: 29 percent to human services, 26 percent to education and 21 percent to health issues.

Regardless of the issue, Cleveland has been quick to respond to the needs of the community. Brown and Flynn attribute that generosity in part to an overwhelming feeling of corporate responsibility in Northeast Ohio.

But with corporate responsibility comes a new focus on accountability, which affects not only corporate giving, but also the way nonprofits are approaching businesses for donations.

"There are less resources out there, forcing the nonprofits to think about who they approach and be more thoughtful," says Flynn.

And accountability is becoming more of an issue with corporate philanthropy and giving in general. More donors are expecting to see a return on investment in philanthropy, much like they do in business.

In this new atmosphere, there has been a change not only in the way nonprofits conduct programs but in the way foundations, businesses and individuals support them.

Take, for example, Cleveland Social Venture Partners (CSVP), which acts as venture capitalism for nonprofits, investing in them the same way venture capitalists invest in start-up companies.

"We have 19 partners to date," says Brad Neary, one of the founding members and soon to be former director of leadership development at TRW. "We come together first with our wallets -- and that is a requirement of $10,000 over two years ... and then we set out to find a nonprofit."

The group recently went through a rigorous process to choose an organization to work with and decided on Youth Opportunities Unlimited (YOU). From there began a commitment to closely work with the organization.

"We lend our expertise and time, we assist them in building. We do not support programs, we support capacity building," says Neary. "We're not taking over, but working in partnership with the board."

CSVP members come from all walks of corporate life and include lawyers, financial experts and professionals with other skills. They use their expertise to help the business side of YOU.

"The organization is not just looking to get money," Neary says. "They need time and talent, and it takes several hours a week to do this."

Neary says CSVP is different because the partners feel directly responsible for the nonprofits they help. It's about accountability on both sides, working together to create a better infrastructure.

It may not be for everyone, but entrepreneurial types who like building something from the ground up would have it no other way.

"I write a check pledge to the United Way, but I'm not always sure where that money is going," says Neary. "I'm supporting programming with United Way, but here I'm supporting internal capacity."

According to Neary, "it takes dedicated and passionate people to make it happen." And it seems that Cleveland has its share of those people.

In the end, everyone says the same thing about their giving experiences: "I get back as much as I put in, and sometimes more."

"We should be proud of the history of giving here in Cleveland," says Neary. "There is a lot of concern about the city and where it is going. There is a new generation of philanthropic people and organizations that are not going to let that history go."

Or as Flynn says, "It's a very giving community, and I'm proud to call it home." How to reach: BrownFlynn Communications, (440) 484-0100; Cleveland Social Venture Partners, (216) 231-2300.