By Cynder Sinclair on December 14, 2012

This time of year most businesses find their mailboxes and inboxes overflowing with donation pleas. It seems like more requests come your way every year.

There are so many good causes, especially in the Tri-Counties. How can you decide which organizations to give to? As a business person and a caring individual, you want your dollars to have the greatest impact on your community.

You know you’ll have to say no to some of the requests, but how will you decide? Following this three-step process may be helpful in prioritizing your philanthropic decisions.

• Step No. 1: Know why you are giving.

Many companies are realizing that charitable giving goes hand-in-hand with financial out-performance. So they make sure that philanthropy is a key component of the strategic business plan.

Studies have shown that when price and quality are equal, customers will do business with companies that support a cause. However, the reputational benefits that flow from acts of corporate citizenship depend on their being perceived as genuine acts of citizenship. You don’t have to be purely altruistic in your motivation, but neither should your marketing be dressed up to look like citizenship. Customers respond best to businesses that are guided by a core ideology.

This is why the first step is so important. In order to ensure coordination between your head and heart, you must first identify what motives drive your company’s giving engine. You as the owner of your business can make all the decisions about giving or you can enlist the input of your employees. Including employees in the giving decisions can increase morale, strengthen their commitment to the company, and even enhance job performance.

Don’t feel daunted by the sheer number of good causes to choose from. Start by making a short list of “cause categories” that resonate with you and your employees.
For example, if you own a restaurant you might want to give to the local food bank.

Kohl’s in Santa Maria recently announced that it is choosing to combat childhood obesity by donating to the Marian Regional Medical Center. You can choose nonprofits based on how their mission resonates with your company’s values or you can choose a variety of organizations that reflect individual interests of your employees.

If you and your business are passionate about causes that help keep women and children safe, consider organizations such as Child Abuse Listening Mediation, or CALM; Court Appointed Special Advocates, or CASA, of Santa Barbara County; or Domestic Violence Solutions for Santa Barbara County.

If affordable housing is a cause that aligns with your passions, look into Habitat for Humanity, Peoples’ Self Help Housing or Transition House. Are you interested in supporting end-of-life care through organizations such as Hospice of Santa Barbara? How about helping people recover from addictions through organizations such as the The Santa Barbara Council on Alcoholism and Drug Abuse or the Rescue Mission?

• Step No. 2: Decide which organizations to give to.

Once you have identified your company’s motives for giving, it’s time to decide where your gifts will go.

Take a look at the list of nonprofits you compiled from Step 1. Rank the organizations in order of their priority to you. Now you’re going to choose charities that are truly making a difference and that are going to be around for awhile. You want to be sure that any donations you give support organizations that are financially stable, well-run and achieving results for their mission.

Surprisingly enough, nonprofits can be more complex than for-profit businesses, so it’s important to check some key indicators of success. Whether you are considering giving to a small community nonprofit or the local chapter of a nationwide organization, it’s a good idea to take a closer look.

Get to know your local nonprofits. Meet the executive director, take a tour of its facility, and pay attention to its actual work within your community. Find out who serves on its board of directors and if the board members are donors to the organization. If board members are not willing to contribute to their own organization, why should you?

Do you see the agency making a difference locally? Ask around and find out what sort of reputation the organization enjoys. Find out if it follows a current strategic plan. Maybe you would even like to volunteer and encourage your employees to volunteer.

You can review the finances of any nonprofit with a 501(c)3 tax exempt status by examining its 990 tax return at www.guidestar.org. Pay special attention to Guidestar’s new product, Financial Scan, which focuses on each organization’s impact and financial health. While the rule-of-thumb is that a charity should spend no more than 25 percent of its budget on fundraising and administration and 75 percent on programs, the more important indicator is the result of the organization’s work.

Another important consideration is whether the nonprofit can sustain its programs over time. Its 990 will reveal whether it is able to grow revenue at least at the rate of inflation, is able to continue to invest in its programs, and maintains an appropriate reserve account for unexpected expenses. These are all indicators of economic sustainability and accountability.

You can find a treasure trove of valuable tips on philanthropy at www.charitynavigator.org. Keep in mind that a nonprofit’s full cost of doing business includes: 1) direct costs of delivering programs; 2) indirect costs to support effective program delivery such as fundraising, marketing, management salaries, occupancy, and infrastructure; and 3) costs related to strengthening the balance sheet.
But don’t be surprised by high percentages spent on personnel costs. It’s common for human service nonprofits to spend 52 percent to 75 percent of their management and general funds on personnel expenses, since this is usually the vehicle for delivering their services.

Step No. 3: Choose the best giving vehicles for your company.

Businesses can add value to nonprofits in a number of ways. Of course, the simplest way to give is simply to write a check. Whether the funds come from your marketing budget or from your sponsorship budget, you will want to give serious consideration to ways the nonprofit can publicize the gift. Making sure the public knows that your company is giving back to the community is not about bragging; it’s about following a solid business best practice.

Other ways of giving to nonprofits include sharing your company’s expertise — financial, marketing, business planning, etc. Co-marketing is also an option. Including a nonprofit in your marketing ad will not cost your company anything, but it will increase the nonprofit’s visibility. It will also help deliver the message to your customers that you care about the well-being of the community. Remember that volunteering your time or your employees’ time can yield multiple advantages. Nonprofits will benefit, your employees will feel more engaged, and it can increase your company’s understanding of needs in the community.

You are now ready to make your contributions with the certainty that they will make a significant impact in your community and on your business. Your gifts will make a difference and the organizations you give to will be the ones that are strong and viable for the long-term.

You may also consider joining the recently-formed Corporate Philanthropy Roundtable, a Santa Barbara-based group. CPR exists to foster discussion and best practices between companies. Businesses of all sizes are invited to learn, share and discover why corporate giving matters to business and to the community.

• Cynder Sinclair is a Santa Barbara-based nonprofit consultant.