5.2 Budgeting and Resource Allocation

Budgeting and resource allocation are crucial for effective corporate giving. Companies use various models, from profit-based percentages to fixed budgets, to determine their philanthropic spending. Long-term commitments and endowed foundations provide sustainable funding for larger initiatives.

Employee engagement is another key aspect. Matching gift programs and volunteer time off encourage staff participation in giving. Non-cash contributions like in-kind donations and cause marketing campaigns allow companies to leverage their unique assets and expertise to support nonprofits and social causes.

Budgeting Models

Profit-Based Budgeting

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• Percentage of profits model allocates a set percentage of company profits to philanthropic activities each year
  • Allows giving to scale with company performance but can lead to inconsistent funding levels year-over-year
  • Common percentages range from 1-5% of pre-tax profits (Walmart, Patagonia)
• Fixed budget allocation sets a specific dollar amount for philanthropy annually regardless of profits
  • Provides more predictable funding but may not keep pace with company growth
  • Dollar amounts vary widely based on company size and commitment to giving (Bank of America, $200 million annually)

Long-Term Philanthropic Commitments

• Multi-year commitments pledge a total donation amount to be paid out over several years
  • Enables long-term planning and larger-scale initiatives by recipient organizations
  • Requires careful forecasting to ensure future budgets can sustain the pledged amount (GlaxoSmithKline, $25 million over 5 years to Save the Children)
• Endowed foundations established by companies provide grants funded by investment returns on a principal sum
  • Ensures perpetual funding as only the returns, not the principal, are spent each year
  • Initial endowment can be funded by a large gift or built up over time (Novo Nordisk Foundation, $30 billion endowment)

Employee Engagement

Matching Gift Programs

• Companies match donations made by employees to eligible nonprofits, usually up to a set annual maximum per employee
  • Incentivizes employees to support causes they care about with company funds
  • Match ratios are typically 1:1 but some companies offer higher matches (Microsoft, up to $15,000 per employee annually at 1:1 ratio)
• Volunteer grant programs donate a set amount to nonprofits where employees volunteer a minimum number of hours
  • Encourages employee volunteerism while also providing financial support to nonprofits
  • Hourly commitment and donation amounts vary by company (Boeing, $100 volunteer grants for every 10 hours logged)

Volunteer Time Off

• Companies offer paid time off for employees to volunteer with nonprofits during work hours
  • Enables employees to serve in the community without using personal time off
  • Commonly 16-40 hours are offered annually (Deloitte, 48 hours of paid volunteer time off per year)
• Companies organize group volunteer events for team-building and community impact
  • Provides a shared service experience and demonstrates company commitment to giving back
  • Projects range from park cleanups to school renovations (Timberland, annual day of service for all employees)

Non-Cash Contributions

In-Kind Donations

• Companies donate goods or services instead of cash to support nonprofits and social causes
  • Leverages company's core competencies and assets to provide needed resources
  • Examples include product donations, free services, or use of company facilities (Uber, $5 million in free rides to domestic violence survivors)
• Technology companies often donate or discount software licenses and equipment to nonprofits
  • Enables nonprofits to access productivity-enhancing technologies they couldn't otherwise afford
  • Scope varies from a few licenses to organization-wide access (Salesforce, free licenses for up to 10 users at any nonprofit)

Cause Marketing Campaigns

• Companies partner with nonprofits on marketing campaigns that raise awareness and funds for a cause
  • Builds brand reputation while generating financial support for nonprofit partners
  • Commonly involves donation of proceeds from product sales (Warby Parker, Buy a Pair, Give a Pair program donates glasses)
• Portion of campaign advertising budget is allocated to promoting the cause and nonprofit partner
  • Expands reach of nonprofit's message through company's marketing channels
  • Amount varies based on scale of campaign and depth of partnership (McDonald's, 25% of Happy Meal proceeds to Ronald McDonald House Charities)

Philanthropic Funding

Strategic Grant-Making

• Companies establish formal grant application and review processes to select nonprofit recipients
  • Aligns funding with strategic priorities and enables tracking of impacts and outcomes
  • Often includes online application, eligibility criteria, and committee review (Google.org Impact Challenge)
• Grants can be unrestricted for general operating support or restricted to specific programs and initiatives
  • Unrestricted funding provides flexibility for nonprofits to allocate as needed
  • Restricted grants ensure alignment with company's focus areas and goals (Bank of America Neighborhood Builders program, $200,000 in flexible funding + leadership training)
• Multi-year grants provide predictable funding for long-term projects and capacity building
  • Enables nonprofits to plan ahead and sustainably scale their work
  • Typically 2-5 year commitments with annual payment installments (Citi Foundation, $50 million in multi-year grants to support youth job skills training)