The Third Generation of Measurement

October 01, 2000

On both sides of the Atlantic, community involvement measurement is entering its most important phase, as companies try to evaluate what their programmes actually achieve for both company and community. The first generation of measures were fairly crude – expressing giving as a percentage of a company’s pre-tax profits, for example. Popularised by the formation of “percent clubs” in the US and the UK, companies used these measures primarily to campaign for bigger community budgets.

Eagerness to head the philanthropic league tables led to big disparities in the ways companies calculated their contributions. The next generation of measurement responded by setting standards for what activities should “count” as community contributions and how to value them. However, many companies working on measurement, particularly London Benchmarking Group members, realised that the accurate measurement of inputs was not an end in itself, but the first step toward professional management and evaluation of community programmes.

In the UK, the London Benchmarking Group (LBG) has just launched a guide to measuring the outputs and impacts of community programmes, and is now inviting new companies to join and get help in implementing the model. Meanwhile in the US, a Council on Foundations project team is developing a standard tool for measuring the business value of corporate philanthropic programmes.

An American Approach

The Committee on Corporate Grantmaking of the Council on Foundations is developing a “do it yourself” toolkit for companies to evaluate their programmes and benchmark them against other companies. The project grew out of an earlier effort to quantify the impact of corporate citizenship on company reputation. It is funded by the Aetna Foundation, the AT&T Foundation, the Bank of America Foundation, Boeing, the DaimlerChrysler Corporation Fund, the Dayton Hudson Foundation, the GTE Foundation, the MCI WorldCom Foundation and the Merrill Lynch Foundation. Walker Information , an Indianapolis-based research company, is helping to develop the project.

The project focuses on measuring philanthropy’s business benefits: at the core is how perceptions of the company affect sales and profitability, customer loyalty, corporate reputation, employee retention and morale. The social value and impact of community programmes is not covered.

The key component of the toolkit is a set of surveys to be conducted with a company’s stakeholder groups, including employees, customers and community influentials. Participants’ perceptions of the company’s philanthropy are collated into a Philanthropic Citizenship Index (PCI). Other questions aim to elicit how survey respondents feel about the company and its corporate citizenship. Also their behavioural intention outcomes – for example whether employees plan to stay with the company for two more years, whether customers will continue doing business with the company.

Preliminary findings from a test on three companies are that stakeholders which rate a company’s overall citizenship highly (a higher PCI), are more likely to have favourable attitudes towards the company and to intend to behave in ways beneficial to it. The project team is testing the toolkit and will release it, with full project findings, by the end of the year.

The LBG Model

The LBG, with the UK_Charities Aid Foundation, has just published the second volume of its practical guidebook to measurement for community affairs professionals, based on the work of the 18 member companies. The first volume, Companies in Communities: valuing the contribution , provides a template for valuing the inputs of a company’s community programmes, including cash donations, in-kind gifts, employee time and management costs. Uniquely, the LBG classifies company programmes as charitable gifts, community investment or commercial initiatives, based on a company’s motivation for undertaking them. With the LBG approach, motivation for a programme affects how outputs and impacts are measured.

The second volume, Companies in Communities: assessing the impact , advises on measuring the business and community benefits, leverage from the company’s contribution, and the longer-term impacts. The LBG model stresses the importance of measuring the benefits that flow to both the community and the company from each major community programme.

Here is an example: Whitbread supports the Youth & Community Centre in Salford, England, as a community investment. The company provides cash and in-kind support, including IT equipment, televisions and furniture. Whitbread’s contributions are leveraged by the local council, a lottery grant, the Sports Council, and other companies. The community saves £70,000 in building costs. It also benefits from better community spirit, lower crime rates and the centre’s availability for local activities. The company benefits from enhanced reputation, particularly with local officials, staff development for those taking part in the project and improved relations with the local police. Also, longer-term, from a sustained reduction in the crime rate.

Companies should evaluate the outcomes and impacts of a purely charitable gift differently from those of a cause-related marketing campaign. The prime aim of a charitable gift is not business benefit, so the measurement focus should be on benefit to the community. The aim of a community investment is to address a social problem so as to affect the business environment, so output measurements will shift toward benefits gained by both company and community. Cause-related marketing campaigns, designed primarily with commercial objectives, should be evaluated primarily on the business benefit to the company.

The next phase of the LBG starts in November. With the basic methodology for measuring inputs, outputs and impacts now completed, the group will focus on implementing the model and measuring longer-term impacts. They will also try to develop a methodology for evaluating a company’s community involvement by comparing inputs with the outputs and impacts generated.

How Do The Two Approaches Compare?

The final US product is yet to come, but clearly the two groups are tackling community involvement evaluation from different angles. The LBG is essentially a performance-driven evaluation: by setting standards for valuing inputs, the LBG model allows companies to benchmark their expenditure with each other. More importantly, the guidelines for measuring benefits generated for both company and community can help a company assess the efficacy of its community programmes – what outputs and impacts are achieved from a given investment – and manage them more professionally.

The US group arguably focuses on the toughest part of the equation – quantifying the impact of community programmes on reputation. The LBG model allows companies simply to note an improvement in reputation as a benefit, whereas the US group is trying to disaggregate the effect of a company’s community programmes from other factors that influence its reputation. From information to date, it is difficult to see how the US approach will distinguish how each aspect of the company’s programme affects reputation -ie quality, size or degree of stakeholder communication.

The group’s reliance on behavioural intention to define business benefit may also overstate the benefit received. Stakeholders may say how they intend to behave, but there is no way of confirming that they follow through. Also, there is no way to analyse the efficacy of a community programme because there are no guidelines on valuing inputs and comparing them to benefits generated.

Despite different approaches, the LBG and Council on Foundations are both advancing the professional management of community involvement. By applying management tools used in other partst of the business, both groups are moving community involvement into the mainstream business arena.

To purchase the new LBG_book, contact Sarah Rimmell, Charities Aid Foundation, on 020 7400 2300.

To join the London Benchmarking Group, contact Ellen West, The Corporate Citizenship Company, on 020 7945 6130.

To find out more about the US_model, contact Fran Eaton, the Council on Foundations, on 001 202 466 6512.

Corporate Citizenship Briefing, issue no: 54 – October, 2000