WASHINGTON (RNS)--Corporate America has discovered that giving pays. Businesses increasingly see philanthropy as a chance to boost bottom lines by attracting customers, retaining employees and banking goodwill for future times of crisis.

The practice is called "strategic philanthropy," meaning every dollar or product donated must enhance a company's business objectives. Armed with new research, corporations have adopted a philosophy of "doing well by doing good."

A national study released recently showed companies are doing significantly better when it comes to donating charitable dollars. Their 1999 giving increased more than 14 percent from 1998, with at least some of the hike credited to strategic philanthropy.

If strategic philanthropy proves to be the "win-win" proposition its advocates claim, it could continue to provide a lift for the country's 730,000 charities, and shareholders and society will reap dividends as the charitable sector unleashes its creativity to tackle social problems.

But not everyone wins all the time with strategic philanthropy. One of the most successful broad-based corporate giving campaigns in history, the United Way, has suffered directly from strategic giving, according to another nationwide study.

A few critics fear strings-attached giving, in which big business might seize too much control of schools and other organizations in exchange for generous contributions. And isn't there something unseemly about giving to receive? Philanthropy has traditionally been defined as a desire to help humanity, not a scheme to fatten a company's bottom line.

"Strategic philanthropy' is an oxymoron," said Irving Warner, a Los Angeles-based author, writer and fund-raising consultant. "If you want to say that using charity as a business tool is good business, that's fine. Call it that. But don't equate it with righteousness."

Examples of strategic philanthropy abound. Viewing their philanthropy as investments instead of giveaways, Mitsubishi Electric helped teach handicapped kids to ice skate, Home Depot built 25 playgrounds in poor communities and Bally Total Fitness donated nearly $10 million in used exercise equipment as charity.

Corporations funded only 5.8 percent of the $190 billion-a-year philanthropic pie in 1999, compared to a 75.6 percent slice provided by individual donors, according to a study recently released by Giving USA 2000 and the American Association of Fund-Raising Counsel. The amount corporations gave to charity increased 14.2 percent from the previous year, following a 9 percent boost from 1997 to 1998.

The increased generosity is encouraging, but nowhere near what companies could and should do, said Curt Weeden, author of "Corporate Social Investing," a book on how companies can profitably give.

"If you continue to rely on tin-cup philanthropy where nonprofits beg for money from corporations, we're going to stay where we are," Weeden said.

At first, Darell Hammond of Washington held a tin cup, not to corporations, but to foundations that give grants. Hammond's vision was to build safe and attractive playgrounds for kids.

"They thought it was a nice thing to do, but they wouldn't fund it," said Hammond, who named his nonprofit KaBOOM!

As a second option, Hammond went to corporations. He proposed partnerships in which companies could align their brands with attractive values--such as children, safety, communities and health. He investigated companies' challenges and goals, and presented ways to achieve them through philanthropy. Hammond even found ways to measure such things as changes in sales, brand awareness and employee morale, "to see if we hit or missed the bull's-eye."

Since 1995, Home Depot has supplied plans, materials and an army of volunteers in trademark orange T-shirts to build 29 playgrounds in 28 cities. Other corporate partners include Nike, Walgreens and Motorola.

The term "strategic philanthropy" has been around for years, but the practice has only recently gained momentum nationwide, said Frank Walker, chairman of Walker Information, an Indianapolis-based market research company. Walker said that while many companies have intuitively known good deeds pay off in the long run, many haven't been systematic about whom they give to, and even fewer have tried to quantify the results.

"It's as if companies have said, `We have some funds. Let's do some good. The CEO likes tennis, so let's sponsor a tennis tournament,"' Walker said.

The future is more sophisticated than that. With Walker's help, the Council on Foundations is developing measurement tools that link corporate giving with specific outcomes. The hope is to make that widely available by the end of the year.

"When CEOs figure out that philanthropy is imperative to success, corporate giving programs will become more accountable," said Walker. "When giving becomes more accountable, it will be done better and more efficiently and the amount of dollars given will grow. I'm just corny enough to think this is going to change the world."

One change may be in direct corporate giving to the United Way. A study of 226 corporations by researcher Jerry Marx showed that "the higher the level of strategic philanthropy, the lower the percentage contribution to United Way." The study concluded that the United Way should develop "a new development model" that more carefully considers business needs.

The 1997 study was published in Nonprofit Management & Leadership magazine and financed by the Lilly Foundation, the Center for Corporate Community Relations at Boston College and the Indiana University Center on Philanthropy.

Executives at United Way of America headquarters in Alexandria, Va., did not respond to several requests for comment.

Other research indicates that cause-related marketing, a practice closely linked with strategic philanthropy, helps contribute to the bottom line.

About 90 percent of employees who work for companies involved with a cause feel proud of their company's values, compared to 56 percent without such programs, according to a five-year study conducted by Roper-Starch Worldwide, a marketing and public opinion research firm based in Harrison, N.Y. Among consumers, two-thirds said that if price and quality were equal, they would switch to a brand or retailer associated with a good cause.

Young people seem to be particularly drawn to these cause-oriented companies. "The teen numbers are astounding," said Carol Cone, chief executive officer of Cone Communications, a Boston public relations and marketing firm that paid for the study and is an industry leader in the philanthropic area. "If you're a company needing to appeal to the next generation of consumers, this is critical."

One of Cone's success stories has been the Reebok Human Rights Award, which spawned from Reebok-sponsored rock concerts. Through the award, said Cone, Reebok has escaped the wrath Nike has suffered in the debate over working conditions in overseas shoe factories.

When the Chicago-based Bally Total Fitness decided to renovate 350 fitness centers around the country, it had to decide what to do with nearly $10 million worth of used exercise equipment. Instead of selling it, Bally gave the equipment to inner-city schools, youth-at-risk programs, police and fire athletic leagues and others under a "Stronger Communities" program.

"The very first thing this does is make our employees very, very proud," said Dave Southern, vice president of public and investor relations for Bally. "It's also a great source of pride for our members and probably strengthens their sense of affinity to our company. And it gives us good community relations...and that helps gain new members."

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