Working with NFPs: Growing interconnection with the business world

One of the most important features of the 2000s will be the growing interconnection between the interests of not-for-profit organisations and the business world. Kristin Whorlow* says not-for-profits are increasingly interested in leveraging limited resources while many corporations see direct benefits to their bottom lines from working with them

Historically, many Australian corporations have made direct contributions to not-for-profit organisations and their operations. They have contributed money, sometimes expertise and facilities, and sought to build coalitions to achieve local and national social objectives.

Many directors have taken part in not-for-profit operations, serving on boards or heading fund-raising drives. However, the 1990s have seen corporations and private-sector marketing executives looking for ways to become more closely involved in joint ventures with direct benefit to their corporations.

This new set of relationships in which private marketers participate in not-for-profit marketing activities for private sector gain is referred to as cause-related marketing. Cause-related marketing started in 1982 when Jerry C Welsh, then chief of worldwide marketing for American Express Company, agreed to make a 5 cent donation to the arts in San Francisco every time someone used an American Express card and $2 every time American Express got a new member.

The approach was so successful that American Express tried it on a national basis. In 1983, Amex agreed to set aside 1 cent for every card transaction and $1 for each new card issued during the last quarter of 1983 to support the renovation of Ellis Island and the Statue of Liberty. Amex reported sales increases of 28 percent over the same period the previous year with a total of $1.7 million eventually donated to the renovation project.

In contrast to the dramatic growth of cause-related marketing in the US and the UK, Australian corporations have been slower to recognise the potential benefits of adding the resources and expertise of not-for-profit causes.

Cause-related marketing should not be confused with traditional corporate philanthropy which involves simple donations of cash or goods or services to deserving not-for-profits without the expectation that the donations will be publicised or otherwise contribute to benefit the corporation.

Sometimes cause-related marketing activities that don't yield immediate sales can have long-term effects on sales through improved corporate or brand image and better employee morale.

Australian corporations have several options when it comes to cause-related marketing. Some choose corporate issue promotion, promoting a socially desirable activity or behaviour on their own without involving a not-for-profit organisation.

Others choose joint issue promotion, paying for and/or designing a campaign, in cooperation with a not-for-profit or government organisation, without expecting any direct pay-back.

Sales-related fund-raising is increasingly common. A corporation agrees to donate funds or equipment to a not-for-profit or charitable organisation in proportion to the number of sales or other customer transactions that are made.

Historically more common is licensing, where not-for-profit organisations license their logos to private sector marketers for some sort of financial benefit, usually a flat fee or a percentage of profits.

Australia's National Asthma Campaign (NAC) came into existence 10 years ago to lead a national effort to combat the alarming number of deaths from asthma. Since its formation the number of deaths from asthma has fallen from 964 in 1989 to 715 in 1997. In addition, national surveys indicate that asthma treatment by general practitioners and pharmacists and asthma management practices of children and adults with asthma have all improved.

The greater understanding of asthma and the improvements in its treatment and management, brought about by the NAC, have been achieved with the support of the corporate sector.

The NAC receives some project grants from government but its annual income has been largely derived from sponsorships, corporate donations and some cause-related marketing. The pharmaceutical industry has been the major contributor with support also coming from the general corporate sector.

These corporate alliances have provided not only financial support to the NAC but also marketing advice and in-kind assistance. During the past 10 years, they have enabled the NAC to deliver targeted messages on asthma management to doctors, pharmacists and people with asthma, to handle asthma issues and to develop national policies on asthma.

Organisations like the NAC must generate income to carry out their activities but are not in the business of making substantial profits. Some build-up of financial resources is desirable but is not the prime focus of the business. Recessions affect not-for-profit organisations as much as the rest of the business community and usually create greater community demands on charitable and health services.

Like most not-for-profit organisations, the NAC uses its limited funds judiciously, building on existing structures and strategies to deliver its campaign messages. This frequently means directors working more closely with a sponsor or partner.

For example, the NAC's Asthma Management Handbook, Australia's textbook on asthma for general practitioners and pharmacists, is delivered to 22,000 general practitioners and 12,000 pharmacists nationally by the sales representatives of the sponsor. The results? Huge savings in postage for the NAC and effective personal delivery of a highly credible, non-commercial product for the sales representatives.

Not-for-profit organisations such as the NAC are charged with the task of delivering positive benefits to the Australian community. Directors' responsibilities for not-for-profit and charitable organisations are no less onerous than for commercial enterprises.

In fact, there is greater potential for unintentional infringements of correct corporate governance procedures as such organisations often rely on small management structures and largely volunteer workforces.

Good intentions, if not channeled and guided by directors of not-for-profits, can easily supplant proper process and deviate from the need to maintain income generating activities.

Board appointments can also be more complicated in order to achieve a correct mix of business, special interest, volunteer and health professional skills. The board and CEO of the not-for-profit organisation need to be adept in marrying the ideals and the ambiguity inherent in not-for-profit organisations with good management and commercial reality.

Consequently, in developing a sound cause-related marketing strategy, the NAC is careful to select corporate partners with mutual interests. Board members' advice is often sought to ensure that potential partners whose product or service may conflict with the NAC's mandate, or whose product and service claims are unsubstantiated, are screened out.

The NAC applies sound marketing principles to show how the proposed relationship will meet a corporation's mainstream commercial objectives and clearly specifies the role each partner is to play.

Asthma continues to be a serious problem in Australia. The NAC has co-ordinated the efforts of a national network of health professionals, corporate and community organisations and individuals to improve the quality of life of people with asthma. Unfortunately, the prevalence of asthma is increasing in Australia as in most countries with a western lifestyle. Various theories are propounded for this increase but the complex interaction of factors responsible has yet to be defined.

The NAC has responded to the future challenge of increasing asthma prevalence by developing the National Asthma Strategy Implementation Plan. This four-year blueprint considers all current asthma education and research activities, those planned for the near future and identifies the gaps where action will be needed. Thoracic physicians, general practitioners, pharmacists, allergists, Asthma Foundations, consumer representatives, respiratory scientists, the corporate sector and government have contributed to this strategy which aims to improve the quality of life of people with asthma, reduce the cost of asthma to the community through better asthma management and continue to reduce the number of deaths. While asthma cannot yet be cured, it can be managed to ensure optimal quality of life.

Kristine Whorlow is CEO of the National Asthma Campaign, the peak body for asthma in Australia. The NAC is a collaboration of The Thoracic Society of Australia and New Zealand, The Royal Australian College of General Practitioners, the Pharmaceutical Society of Australia and Asthma Australia. She may contacted at nac@netlink.com.au or (03) 9214 1476

Program to fill the bill

The AICD will soon launch its "not-for-profit governance" program designed for directors of community organisations, unpaid organisers, committee members and aspiring chairmen of not-for-profit organisations.

The program will teach participants the key aspects of their role from a legal and financial point of view and how to benchmark their organisation's growth. Participants will learn how to improve their board teamwork skills and learn to develop processes and procedures and to effectively communicate their organisation's achievements.

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.