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Saturday November 22nd, 2008 |
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New Corporate Community Programs Stress Investment, Not Philanthropy, New Conference Board Report Finds |
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NEW YORK, March 20 /PRNewswire/ -- Some innovative corporate programs to improve life in communities across America are going beyond traditional philanthropy and focusing on investment, according to a new report by The Conference Board.
These companies' programs are not simply charity, because they boost economic growth rather than redistribution of dollars. And they are not purely commercial activities, since they are expected to aid entire communities and not just the company and its shareholders.
The Conference Board study provides concrete evidence of successful corporate community development programs in four case studies involving large companies: JPMorganChase, John Deere, General Mills, and Cascade Engineering.
This kind of corporate social investment helps the company, because the company is part of the community where the investment is being made, says Thomas E. Cavanagh, Senior Research Associate at The Conference Board and author of the report. The investment benefits the company by making its home community a more desirable place to live and work.
Social investments take several forms: job training (developing human capital), bricks and mortar (developing physical capital), and financial subsidies (developing financial capital).
WHERE BUSINESS IS TAKING THE LEAD
The study finds that mastering the cultural differences between corporate executives and community activists remains one of the most important challenges in making community redevelopment work. To build or rebuild bridges, companies need to cultivate relationships with nonprofit groups and community leaders who enjoy credibility and stature with local residents. As important as these relationships are, corporate liaison staff should also make a point of maintaining visibility and contact at the grassroots level, so that they are not relying solely on peer-level meetings with local leaders for their impressions of community opinions, concerns, and priorities.
Government's role is often quite limited in these projects, with the private sector expected to take the lead. The most useful role government plays is making the numbers work by offering subsidies and tax breaks, while leaving operational direction to the private sector.
An emphasis on growth, not redistribution, and on investment, not donations, brings the practice of corporate community development in line with the more general business practice of the company, says Cavanagh.
MEASURING THE RESULTS
The Conference Board study offers a template for evaluating the returns on corporate community investments by using an economic value added (EVA) methodology. This calculation incorporates the opportunity cost of capital in assessing the returns on investment. Each project is assessed in the following terms:
* Inputs -- Financial, Human, and In-Kind Resources Used
* Outputs -- Goods and Services Provided
* Impacts -- Long-Term Effects on the Community
Returns were calculated by comparing outputs to the total of all inputs from all sources, and adjusting for the cost of capital. All four projects cited in the study were found to yield a positive return. A working group organized by The Conference Board studied four best-practice examples of corporate involvement in economic development projects.
JOHN DEERE: 'RENEW' MOLINE
Moline, Illinois is often called the city that John Deere built. The company dates to 1837, when a blacksmith named John Deere invented the first commercially successful self-scouring steel plow. The operation moved from Grand Detour, Illinois to Moline in 1848. The fortunes of the company and its headquarters city have been closely linked ever since. Today, the $14 billion Deere is considered the world's leading producer of agricultural, forestry, and lawn-care equipment, and is one of the largest international vendors of construction equipment.
Deere assembled the public-private partnership Renew Moline to realize the redevelopment potential of the city's downtown area. Renew Moline identified a funding mechanism which made possible a greatly expanded redevelopment effort. Downtown Moline had Tax Increment Financing (TIF), a state program that permitted the development authority to retain and use redevelopment-based increases in sales and property tax revenue to finance additional improvements. Under its aegis, the Radisson Hotel, the first downtown Moline business-class hotel, was built, as was the John Deere Pavilion, a downtown museum of agricultural technology that has become a major tourist attraction.
GENERAL MILLS: SIYEZA FOODS
Faith in people, faith in a concept, and faith in God launched Siyeza Foods, with help from General Mills. In the mid-'90s, General Mills wanted to create a new manufacturing business in the Minneapolis inner city, with neighborhood residents as employees. The Stairstep Foundation, a center for development initiatives in Minneapolis' African-American community, would direct the effort and Stairstep Inc. would contribute its own community-based funds. To demonstrate its commitment to other potential partners, General Mills signed a letter of intent to codify the agreement and move the investment plans forward.
General Mills agreed to work with the Southern U.S.-based Glory Foods to develop a new frozen meal line based on traditional Southern cooking dishes. The new venture was named Siyeza, a Zulu word meaning We're coming. General Mills played a crucial role in providing finances at several key junctures in the life of Siyeza. But even more important than the money were the resources of credibility and expertise General Mills brought to bear as a major corporation. Given the value placed on community building, Siyeza's employee recruitment has been heavily focused on the inner-city labor force.
CASCADE ENGINEERING: PROJECT ZERO
The passage of federal welfare reform in 1996 inspired elation in some circles and deep concern in others. Many observers had come to believe that welfare was a dead end, robbing its recipients of dignity and self-sufficiency. Yet there were fears that the welfare population would be unprepared to move into the world of work and might fall victim to the holes in the social safety net.
New partnerships began to emerge in many communities, linking the public, private, and nonprofit sectors to implement welfare reform. One of the most successful involved Cascade Engineering, a plastics manufacturer in Grand Rapids, Michigan. Building on a long tradition of innovation in human resources programs and community service, Cascade developed a welfare-to-work program that trained its participants to perform high-skilled manufacturing jobs at attractive wages. The new Project Zero initiative, which aimed to move all of the welfare recipients in six counties into paid employment, is just one of a package of programs that enhances the employee environment at Cascade. Cascade wanted to offer more than just jobs. The company wanted to help people find careers. Cascade is also noteworthy for having one of the most comprehensive packages of employee training and benefits now available in the U.S. Cascade's workforce philosophy is to provide lifelong education that benefits employees as well as the company.
J. P. MORGAN CHASE: HARLEM USA
In the late 1990's, Harlem's west side began attracting a major wave of residential and commercial development as the black middle class returned to turf that once showcased African Americans' culture. Blocks of brownstones were rehabilitated, Pathmark built a major supermarket, and a block-long glass-enclosed shopping mall known as Harlem USA was built at the corner of 125th Street and Frederick Douglass Boulevard. Harlem USA opened for business in February 2000. It features such blue-chip tenants as a Magic Johnson arena-seating movie theater, The Disney Store, Old Navy, HMV, and several prominent regional retailers. Harlem USA is the largest inner-city shopping development in postwar American history.
JPMorganChase quickly achieved its target of 70% pre-leasing to move ahead with the development. Chase's show of confidence was a crucial part of the chemistry that convinced the two anchor tenants, Disney and the Magic Johnson Theater, to sign on. After a year of operation, the occupancy rate was 75%, and most of the tenants were extremely pleased. The Old Navy was the fourth highest-grossing store in the company's chain and the Modell's outlet was that company's best-performing store. Developers are currently planning to add The Harlem USA Experience, a visitor's center offering interactive kiosks and exhibits about the area's history. With approximately 500 new jobs created, Harlem USA has already had an impact in denting Harlem's estimated 18% unemployment rate.
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