01 Oct 2001  Research & Ideas

Connecting With Nonprofits

Nonprofits and business have a long history of collaboration, and the benefits run both ways. In this excerpt from HBS professor James Austin's latest working paper, three levels of collaboration are detailed. Plus: Austin Q&A.

 

Editor's Note— In his recent Working Paper, "Marketing's Role in Cross-Sector Collaboration," HBS professor James Austin outlines three stages of collaboration between businesses and nonprofits—philanthropic, transactional, and integrative collaborations—and examines the related role of institutional and cause-related marketing. This excerpt focuses on the collaborative stages.

Collaborations between businesses and nonprofit organizations are becoming more prevalent, important, and complicated. Marketing plays an increasingly significant role in these cross-sector relationships. This article will first set forth a framework for understanding alliances between companies and nonprofits. It will then examine how such cross-sector collaborations relate to four strategic and interrelated marketing areas: institutional marketing, cause-related marketing, market development, and internal organizational marketing.

Understanding Cross-Sector Collaboration

My field-based research on collaborations between businesses and nonprofits, encompassing a wide range of industries and social sectors, revealed a distinctive pattern in the types and evolution of relationships. As an analytical framework, I conceptualize these as the Cross-Sector Collaboration Continuum along which there are three types and stages of relationships (see Figure 1):

  • Philanthropic Stage. This is the most common type of relationship between businesses and nonprofits. It largely consists of annual corporate donations of money or goods made in response to requests from nonprofits. The level of engagement and resources is relatively low, infrequent, simple, and nonstrategic. It is basically a check-writing relationship. The giver has a charity mindset and the recipient a grateful attitude. The relationship is valuable as part of an effort to market the company as a caring, responsible institution and even to market the nonprofit as a credible organization meriting support.
  • Transactional Stage. Significant numbers of firms and nonprofits are migrating into this second stage, in which the interaction tends to focus on more specific activities in which there is a significant two-way value exchange. The organizations' core capabilities begin to be deployed and the partnership is more important to each other's missions and strategies. It is no longer simply a transfer of funds. This stage would encompass such activities as cause-related marketing programs, event sponsorships, special projects, and employee volunteer services.
  • Integrative Stage. A smaller but growing number of collaborations evolve into strategic alliances that involve deep mission mesh, strategy synchronization, and values compatibility. People begin to interact with greater frequency and many more kinds of joint activities are undertaken. The types and levels of institutional resources used multiply. Core competencies are not simply deployed but combined to create unique and high value combinations. The degree of organizational integration begins to take on the appearance of a joint venture, and in some instances the partners have actually created new, jointly governed entities to carry out their collaboration. This stage of collaboration sometimes involves market development and also internal organizational marketing.

As depicted in Figure 1, as one moves along the Continuum the level of engagement deepens, mission relevance becomes more central, resource deployment expands, activities broaden, interaction intensifies, and managerial complexity magnifies, but so, too, does the strategic value.

" ... the more effective collaborations are characterized by clear purpose, mission congruency, high and mutually balanced value creation, effective communication, and deep reciprocal commitment."
—James Austin

It is important to note that progression along the continuum is not automatic; it is the result of explicit decisions and actions by the partners. And regression and exit are always possible. The Collaboration Continuum is particularly useful in mapping the type of relationships a business or a nonprofit has in terms of the stages. Generally, businesses and nonprofits have multiple relationships, so the Continuum can be used as an instrument for managing their "Partnering Portfolios." Not only can one ascertain the current nature of the existing relationships, but also begin to strategize as to the ideal mix of relationship types one might want to have and assess the organizational and strategic implications for attaining that. For example, within their portfolios, businesses and nonprofits might wish to continue to have several philanthropic relationships as relatively low maintenance engagements that serve useful albeit not critical functions. For another set of relationships there may be opportunities to enter into higher engagement and higher value transactional collaborations. And, for a smaller, highly selective set, the partners might create the more intensive and demanding but higher payoff strategic integrative alliances.

Collaborative relationships are multifaceted. Figure 2 provides additional characteristics of the relationships in each of the three stages. The evolution of these various dimensions does not necessarily take place simultaneously. Consequently, a particular relationship might have some aspects that fall into one stage and others that are in another, thus creating hybrids of different stages.

Figure 2. Collaboration Continuum: Partnership Characteristics

  Philanthropic Transactional Integrative
Collaboration Mindset
  • Gratefulness and charity syndromes
  • Partnering mindset
  • Increased understanding and trust
  • "We" mentality replaces "versus them"
Strategic Alignment
  • Minimal fit required, beyond a shared interest in a particular issue area
  • Overlap in mission and values
  • Relationship as strategic tool
  • High "mission mesh"
  • Shared values
Collaboration Value
  • Generic resource transfer
  • Typically unequal exchange of resources
  • Core competency transfer
  • More equal exchange of resources
  • Joint value creation
  • Need for value renewal
Relationship Management
  • Corporate contact usually in community affairs or foundation; nonprofit contact usually in development
  • Minimal personal connection to cause
  • Project progress typically communicated via paper status report
  • Expanded personal relationships throughout the organization
  • Strong personal connection at leadership level
  • Emerging infrastructure, including relationship managers, communication channels/vehicles
  • Expanded opportunities for direct employee involvement in relationships
  • Deep personal relationship across organization
  • Culture of each organization influenced by the other
  • Partner Relationship Managers
  • Explicit internal and external communication strategies and processes
Collaboration Definition and Performance
  • Minimal collaboration in defining activities
  • Foundation guidelines often determine types of projects or corporations respond to specific requests from nonprofits
  • Miminal performance ecpectations
  • Shared visioning at top of organization
  • Projects of limited scope and risk that demonstrate success
  • Explicit performance expectations
  • Informal learning
  • Projects identified and developed at all levels within the organization, with leadership support
  • Broad scope of activitiesof strategic significance
  • Organizational integration in execution, including shared resources
  • Incentive systems encourage partnerships
  • Active learning process
  • High mutual expectations and accountability

Source: J. Austin, The Collaboration Challenge, (San Francisco:Jossey-Bass, 2000)

My research reveals that the more effective collaborations are characterized by clear purpose, mission congruency, high and mutually balanced value creation, effective communication, and deep reciprocal commitment.

Five Questions for James Austin

In an email interview, Harvard Business School professor James Austin spoke with Working Knowledge managing editor Carla Tishler about his work on collaboration and his ongoing research.

Tishler: You talk about companies transitioning across three stages of collaboration—philanthropic, transactional, and integrative—although these stages are not necessarily linear, nor does every company move through each stage. What are the key factors that force (or encourage) companies to move from one stage to another?

Austin: Moving from traditional philanthropy to higher levels is generally propelled by the two organizations discovering, incrementally, opportunities for mutually beneficial value creation. The closer collaboration is fostered by a perception of shared objectives and values and a growing level of trust. Making it all happen comes from the energy and vision of social enterprise within both the business and the nonprofit.

Q: Integrative collaboration would seem a lofty goal for most companies, as this level of collaboration requires a true meshing of business goals with those of the partnering nonprofit. How do profit-driven CEOs explain this type of collaboration to shareholders?

A: CEOs perceive integrative relationships as strategic alliances and investments that generate significant benefits to the companies. Those benefits vary from case to case but encompass superior capacity to attract, motivate, and retain talented employees who see significant corporate community engagements as an important dimension of their association with a company. The closer interactions of the two organizations can create new opportunities for skill and leadership development. The integrative stage also can bring to the company new and powerful connections with customers, a further opportunity to differentiate the company and its products. It can also elicit positive reactions from government officials and regulators on important business issues.

Q: It's clear that nonprofits get financial benefits from partnering with businesses. Are there other less tangible benefits of these collaborations? What about the downsides? Does a nonprofit run the risk of muddying or diluting its mission as a result of collaboration?

A: Nonprofits in strategic alliances often state that often more than financial assistance, the value comes from skill transfer, credibility enhancement, and access to new networks. Of course, there are associative risks for both partners in a deep and highly visible alliance. If one partner encounters difficulties that generate negative press, the other runs the risk of being tainted. The stronger alliances have deep mutual commitment that enables them to not only endure such difficult moments, but even assist the partner to overcome the problems. Nonprofits can be tempted to take resources from corporations or other donors that might push them into activities that are inconsistent with their mission or values. Such relationships can be disastrous. For example, the AMA broke off a cause-related marketing agreement with Sunbeam Corporation after its members decided that it was not appropriate to its social mission. This ended up costing the nonprofit association over $10 million in compensatory payments and legal fees.

Q: While doing the research for this paper, did you run into any surprises?

A: The joy of research is discovery, so it is a surprisingly rich undertaking. The main discovery in my cross-sector research that seems to surprise people most is the processes whereby traditional check-writing relationships can be developed into very powerful and deep strategic alliances between businesses and nonprofits.

Q: This Working Paper is No. 22 in the Social Enterprise Series. What's the overall aim of the series, and what's next for you as part of it?

A: The Social Enterprise Working Paper series is an integral part of the processes through which my colleagues in the Social Enterprise group at HBS develop and share the intellectual capital that we are continually generating. My current work involves e-philanthropy as well as looking at cross-sector collaboration in Latin America.

Figure 1 Cross Sector Collaboration Continuum

  Stage 1 Stage 2 Stage 3
Nature of Relationship Philanthropic right-pointing arrows Transitional right-pointing arrows Integrative
Level of Engagement Low right-pointing arrows High
Importance of Mission Peripheral right-pointing arrows Central
Magnitude of Resources Small right-pointing arrows Big
Scope of Activities Narrow right-pointing arrows Broad
Interaction Level Infrequent right-pointing arrows Intensive
Managerial Complexity Simple right-pointing arrows Complex
Strategic Value Minor right-pointing arrows Major

Source: J Austin, the Collaboration Challenge, (San Francisco: Jossey-Bass 2000)

Excerpted with permission from "Marketing's Role in Cross-Sector Collaboration," HBS Working Paper, 2001.

Case Studies:
Timberland and Community Involvement
Newman's Own, Inc.