Business and community - a marriage or a fling?

Microsoft profits from community partnerships. So do Australian companies like Stockland, AMP, NAB and Westpac. Does this sit well with you?

If you have a skerrick of social conscience in your body, then the idea of business profiting from community partnerships may get your back up. On the other hand, if you yearn for business to really care about the community and help make a sustained and positive impact, then I'd argue that it needs to profit from doing so.

To make the case, let's look at the three basic types of business and community interactions in turn, and consider their motivations and benefits:

1. Corporate philanthropy

I'm talking about business strategies and actions, and not the actions of foundations that sit alongside major companies.

To give is a good thing, and for businesses to donate money is fine. The problem with this form of giving is that both sides may be missing out on opportunities to drive their dollar further, and fall short in terms of potential impact.

The community group in question gets a windfall gain. The business distributes some of its surplus funds and shares the joy. It may be motivated by the need to ease its collective conscience, by altruism or the need to stroke the ego of its owners or executives.

This is type of relationship is beneficial to both sides, but is akin to a casual fling.

2. Corporate social responsibility

The problem with corporate social responsibility is that no one has really nailed down what it means, as it means quite different things to different people. It tends to refer to transactions, such as supporting certain causes with goods or services or events such as corporate volunteering days.

Again, no one would say this is a bad thing. The motivations for business are usually based on maintaining a licence to operate. In other words, doing enough to be considered a good corporate citizen.

At its worst, it is a mechanism to get a photo of the company helping happy, smiling disadvantaged people on the front cover of the annual report; and business can be condescending in its approach to community-based organisations, expecting them to drop everything to cater for the firm's volunteering needs or kiss their feet for the opportunity to talk to their executives.

The outcomes of CSR are quite variable for community groups and uncertain for the businesses that engage in it. If the outcomes for business are not linked to profitability, it can fall away easily when there's a change of management or the economy turns down.

This is more than a casual fling, but not the basis for marriage.

That is not to say that CSR initiatives are a waste of time, they provide a great entry point into the exploration of more meaningful relationships.

3. Shared value

Going back to Microsoft: several years ago it partnered with the peak body for US community colleges to fund a $50m, five year initiative, designed to help standardise the IT curricula, upgrade technology and improve teacher development.

It didn't do it for the sake of being good.

Microsoft, at the time, was seeing the growth for its own products constrained by a lack of sufficiently trained IT graduates. Given that community college network accounts for 45% of under-graduates – it saw an opportunity to develop the capacity of the labour market to help it fulfil its own objectives.

Some may see it as a form of exploitation. Alternatively, we could see it as the creation of an integrated relationship, more commonly referred to as "shared value”. The business benefits in a financial way (market development, staff engagement) and the community has access to better training and education resources.

The beauty of this type of relationship is that there is mutual value created. If it is done well, it becomes reinforcing over time and more immune to management changes and economic downturns.

A successful marriage is based on many things, such as trust, respect and mutuality, and this is the goal of the shared value approach.

Should business profit?

No one is going to forcing community groups into partnerships without their consent. However, if improved profitability is going to drive the creation of more partnerships and sustain them for longer, then they should be very interested, especially when they are locked in a never-ending cycle of resource constraints.

Provided the partnerships in question are balanced and delivering appropriate benefits to the parties involved, they are a powerful way of levering social impact.

Phil Preston is an independent practitioner who helps organisations find innovative solutions to performance issues. He can be contacted on phil@philpreston.co .