What makes Professor Michael Porter interesting is not his expertise in either community investment or the broader field of corporate responsibility, but quite simply the fact that what he writes gets read, perhaps not by everyone, but probably by your CEO.
Following the creation of his seminal Harvard Business Review article in 1990 “The Competitive Advantage of Nations” and the books that followed, he is one of the most highly regarded academics working in the field of business strategy. In December 2002, Porter, together with Mark Kramer of the Foundation Strategy Group, published a new article in the Harvard Business Review, “The Competitive Advantage of Corporate Philanthropy”, also the subject of his presentation to the 2nd annual colloquium of the European Academy of Business in Society in Copenhagen on 20 September 2003.
The presentation angered many present. Its primary weakness lay in the misuse of the term ‘philanthropy’ which sadly is now firmly embedded into the US corporate vocabulary. Speaking to an audience frustrated by their ongoing battle to educate the world that corporate responsibility does not mean philanthropy, its use in the title and subsequently throughout the presentation was like an enormous red rag to an auditorium of agitated bulls.
The problem with the term is essentially that philanthropy is generally understood to be motivated by the desire to do good, it’s a fluffy term unconnected with business. It implies that any benefits arising from a payment or partnership (other than perhaps a warm glowing feeling) should lie solely with the charitable beneficiary and not with the individual or company responsible. While this is acceptable, indeed laudable, for an individual, it is not yet clear how much value the shareholders of public quoted companies place on keeping the CEO feeling warm and glowing. And in a nutshell, this is the point that Porter was making. “Strategic Philanthropy” then, is merely the US term for what followers of the London Benchmarking Group model might call “Community Investment” or even “Commercial Initiatives in the Community”, recognising that business benefit is an essential part of the deal.
Porter was not addressing the wider issue of corporate responsibility and his second weakness was not making that clear to his audience largely composed of corporate responsibility academics and practitioners. Instead he did two things: Firstly, he presented an old argument that community investment programmes can deliver business benefit (no rocket science in sight). Secondly, and more importantly, he presented a less well understood business-driven process for planning a community investment programme.
The reality for most companies today, is that there are a variety of pre-existing but largely standardised community investment programmes. Community investment managers recite well rehearsed arguments for why these activities generate business benefit. Volunteering programmes may improve employee morale, but how many community investment managers initiated these schemes at the request of an HR director with an employee morale crisis, and how many began them because employees wanted volunteering opportunities, and everyone else was doing it? The latter does not render the scheme worthless, but it illustrates the point that many community investment programmes are based on companies implementing standard schemes with standard justifications, independent of any specific business need.
Yet Porter, like most CEOs, knows that in the 21st century it is innovation and creativity that are key to success. Putting all this together, he concludes that companies could achieve much more through tailored, innovative and creative programmes that help the business compete more effectively. In their article Porter and Kramer suggest the following course of action:
- Examine the core business and the competitive context in which it operates
- Analyse the current portfolio of community programmes to see how well they address the key competitive challenges faced by the business
- Evaluate all programmes, existing and potential, to assess which will most successfully address the competitive challenges
- Enlist the help of other companies and business partners in developing these programmes
- Monitor and evaluate the progress made
Porter and Kramer remark that “while it is true that a growing number of companies aim to make their giving “strategic”, few have connected giving to areas that improve their long term competitive potential. And even fewer systematically apply their distinctive strengths to maximise the social and economic value created […]”. This is all well and good, but what does it mean for the community investment practitioner with a range of programmes already in place?
Ultimately it means thinking bigger. It means being prepared to look at your programmes critically, not just in terms of which parts can be improved, but whether they are even addressing the right issues for your organisation. The fact that a programme has significant social impact and some commercial benefit is not enough for Porter and Kramer. They want companies to go further and really bring the community investment programmes into the area of core business. It means really getting to know both the issues that your company is facing and those that characterise your industry as a whole.
It certainly signals that the days of PR-driven community investment are numbered. According to Porter and Kramer, “As long as companies remain focused on the public relations benefits of their contributions, they will sacrifice opportunities to create real social value”. They continue, “The acid test […] is whether the desired social change is so beneficial to the company that the organization would pursue the change even if no one ever knew about it.” This idea will sit uncomfortably with many community investment teams who still see their role as one of reputation building.
There are implications not just for where community investment sits functionally within the business, but the skills needed to devise and implement world-class programmes. The fusion of mainstream business strategy with community investment will not be an easy process, but potentially could put community investment on a par with other major business development functions, with similar numbers of staff and similar budgets.
So while we can criticise Porter for his failure to translate his strategic philanthropy model into our preferred language of community investment, and worry that he occasionally confuses community investment with the broader area of corporate responsibility, we cannot ignore the implications of his article for the future of this field of business activity. And if by the end of the year you can’t name the top five competitive challenges facing your business, you might want to start looking for a new job.
Editorial Comment
For more comment on Porter’s arguments, see the online debate on the European Business Forum website: http://www.ebfonline.com/debate/debate.asp
Copies of “The Competitive Advantage of Corporate Philanthropy” by Michael E. Porter and Mark R. Kramer are available from Harvard Business http://www.harvardbusinessonline.com , Product Number 242X.
Corporate Citizenship Briefing, issue no: 72 – November, 2003
Thomas Lingard is Community Investment Manager at Unilever UK