From Spare Change to Real Change: The Social Sector as a Beta Site for Business Innovation

U.S. companies have too often viewed the social sector as a dumping ground for their spare cash, obsolete equipment, and tired executives, but that mind-set, says HBS Professor Rosabeth Moss Kanter, has hardly created lasting change. In this excerpt from an article in the Harvard Business Review, she issues a call for corporate social innovation, an approach, says Kanter, that's more R&D than it is charity.
by Rosabeth Moss Kanter

Despite its long economic boom, America's social problems abound. To ensure future economic success, the country needs dramatic improvement in public schools, more highly skilled workers, jobs with a future for people coming off the welfare rolls, revitalized urban centers and inner cities, and healthy communities. Traditionally, businesses have supported the social sector in two different ways: they contribute their employees' time for volunteer activities, and they support community initiatives with money and gifts in kind. Both activities can accomplish many good things and should be encouraged, but neither activity engages the unique skills and capabilities of business.

Consider the typical corporate volunteer program. It almost invariably draws on the lowest common skills in a company by mobilizing people to do physical work – landscaping a school's grounds or painting walls in a community center. Such projects are good for team building and may augment limited community budgets, even build new relationships, but they don't change the education system or strengthen economic prospects for community residents. In many cases, it is just as effective for the business simply to write a check to community residents or a small neighborhood organization to do the work.

And that, indeed, is what many companies do. A great deal of business participation in social sector problems derives from the classic model of arm's length charity – writing a check and leaving everything else to government and nonprofit agencies. Businesses have little involvement in how these donations are used. In fact, this model actively discourages companies from taking an interest in results. Companies receive their benefits up-front through tax write-offs and the public relations boost that accompanies the announcement of their largesse. There is little or no incentive to stay involved or to take responsibility for seeing that the contribution is used to reach a goal. However well meaning, many businesses treat the social sector as a charity case – a dumping ground for spare cash, obsolete equipment, and tired executives on their way out.

Such arm's-length models of corporate philanthropy have not produced fundamental solutions to America's most urgent domestic problems of public education, jobs for the disadvantaged, and neighborhood revitalization. Nor will they, because traditional charity can't reach the root of the problems; it just treats the symptoms. Most business partnerships with schools, for example, are limited in scope: they usually provide local resources to augment a school program, such as scholarship funds, career days, sponsorship of an athletic team, or volunteer reading tutors. The criteria for involvement are minimal, often hinging only on geographic proximity to a company site. The 600 school principals I surveyed said they are grateful for any help from the business sector. But what they really want today, when public education is under attack, are new ideas for systemic change that private enterprises are uniquely qualified to contribute.

As government downsizes and the public expects the private sector to step in to help solve community problems, it is important that businesses understand why the old models of corporate support don't create sustainable change. In partnership with government and nonprofits, businesses need to go beyond the traditional models to tackle the much tougher task of innovation.

About the Author

Rosabeth Moss Kanter is a professor at Harvard Business School.