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News articles for March 2009
Keep up the good work
By Ronel Lehmann
Ronel Lehmann, chairman of Demelza Capital Appeal and chief executive of Lehmann Communications, explains the benefits for law firms of maintaining an active involvement with charities despite the economic downturn.
When Lucy Kellaway, the respected Financial Times columnist, writes in The Economist that the recession is likely to prompt big businesses to send their corporate social responsibility directors on a gap year, it is little wonder the charities sector panics. The credit crunch dominating the headlines and afflicting law firms with ever-increasing vigour is a frightening prospect for the multitude of charities struggling for donations – just as the bagfuls of second-hand clothes have dried up for the high-street charity shops, so the commitments from major corporate donors have dissipated.
Law firms would be well-advised to think before taking drastic action, though. Whilst swingeing cuts to the lawyer ranks are now becoming commonplace – witness Allen & Overy’s announcement last month that it is to part company with 47 partners, 100 associates and 100 support staff – there is no reason why the waving of the axe should be replicated in the CSR budgets.
Now is the time to revert to the strategy that formed the basis of your firm’s CSR programme originally, and test whether those corporate goals still ring true. It is likely that two or three years ago the firm took the view that CSR ought to be embedded in the organisation’s daily business, and that giving pro bono advice, for example, was vital not only for a genuine engagement with the local community in which a firm operates, but also for staff development.
CSR, when it was in vogue and affordable, was about employee and client engagement, improving the corporate image, and, to a certain extent of course, benefitting the bottom line. If those aims were considered laudable three years ago, they should still be just as important today.
Spare a thought
When the work is drying up and the prospect of redundancies is leaving staff genuinely fearful for their jobs, it is little wonder that businesses looking to cut costs reconsider their altruistic sentiments. But before doing so, I would advise law firms to think hard about the impact such budget-slashing can have.
Reza Motazedi is an accountant specialising in the charities sector, as a partner and head of the charity and not-for-profit group at accounting firm Vantis. He says: “There is no doubt that the current economic climate is affecting charities. On the one hand, donations are lower, and on the other, the return on their investments has also been significantly affected.”
Many charities benefitted from the largesse of the banking sector, for example. When big charitable givers such as Lehman Brothers bit the dust, so too did their cash donations, their legions of volunteers, and their pro bono support for needy organisations. The Lehman Brothers Foundation had $28m in assets, and what the collapse of the bank means to the intended recipients of its grants still remains largely unknown. Similarly Lloyds TSB and HBOS were major corporate givers in the UK, but there are justifiable fears that their support for CSR initiatives may wane as a result of their merger and at a time when their shareholders are suffering in the face of financial turmoil.
Witness the impact the recession is already having on the world of sport, with the Royal Bank of Scotland slashing its sponsorship programme as a result of the downturn. Last month the bank, now majority-owned by the government, announced it will end its sponsorship of the Williams Formula One team at the end of 2010, and review its deals with individuals such as tennis star Andy Murray and cricketer Sachin Tendulkar. The news came as the bank announced a record-breaking and horrific loss of around £28bn, and represents a £10m shortfall for the motoring team, or as much as 15% of its budget. Again, it remains to be seen how RBS’s broader CSR programme will be impacted by the review of its giving activities.
The collapse of the Icelandic banking system has already taken its toll. The children’s charity Naomi House, which has run a hospice in Hampshire since 1997 caring for around 450 children with life-limiting conditions and their families, was just one of those severely affected. It launched a charity action group in January called Save Our Savings, to represent charities that have deposits at risk with Kaupthing Singer & Friedlander, the British bank taken into administration in October last year. Over 25 charities are campaigning to secure the return of more than £40m that they had invested with the bank, amongst them Cats Protection, which was also badly hit.
Naomi House is seeking to recover £5.7m in donations that are at risk, and such tales of woe are becoming all too common. Reza Motazedi says: “Charities are facing huge problems. Corporate donations have significantly reduced and are likely to be even more reduced as the recession really bites. However, continued commitments can be justified despite the economic downturn if the charities chosen are contributing towards the welfare of the economy at large. Often charities need to sell their stories better.”
Fighting for funds
There are many different ways in which law firms decide on the charities or local community groups that they wish to support, with some taking decisions at board level, many firms asking staff to vote on shortlists of proposed recipients, and a few relying on personal relationships between individual partners and good causes.
However such decisions are reached, it has never been more important to have the buy-in of the whole firm to a CSR initiative or a fundraising programme. There will always be snipers who criticise charitable giving as their friends and colleagues lose their jobs, and to avoid those negative comments gaining traction, the aims of initiatives must be fully explained and supported.
With so many charities facing difficulties, the requests for support are likely to increase just as the ability to help out comes under pressure. Charities have always been in competition with each other for profile, attention and corporate giving, and that competition will only get fiercer in the coming months and years.
The sophisticated law firms, with the biggest CSR budgets, look for much more in return for their giving than just the satisfaction of having handed over a cheque and a thank-you letter hanging in reception, and well they might. Businesses who give large amounts of money want much broader benefits, often in the form of an ongoing relationship between the two organisations and the opportunity for staff and/or clients to get involved and engage with the charity’s broader aims.
Here, again, a reassessment of the remit of the firm’s CSR programme can be beneficial, and the proper and comprehensive internal communication of its aims can be vital to garnering continued support. Charities have got a lot more sophisticated in their approaches to corporate donors and they recognise a need for that return on investment, so there is no shame in expressing and pushing your own firm’s objectives either at the start of, or during, a charitable relationship.
Gone are the days in which a fundraising appeal could succeed without providing large donors with some additional benefits, be they publicity or ongoing involvement, and in tough economic times firms should look to capitalise on those benefits like never before.
The savvy charities are working hard to make the relationship a mutually beneficial one. One that we work with, Demelza Children’s Hospice, is a case in point. Ted Gladdish, the chief executive, says: “In times of recession, charities need to reinvent themselves and ensure they ask themselves, ‘What will the corporate get from the relationship with us?’. At Demelza, we have formed a business advisory group of external senior business leaders to advise us on what we should be offering the corporate sector. This is proving very worthwhile, and is giving us an edge on corporate funding development.”
Picking the right charity to support is never easy at the best of times, when money is readily available for the task, and it will not be any easier nowadays. Furthermore, the internal battle for support may be more difficult, as those that have battled to embed CSR into the business in the last decade face a tough test of their mettle.
Globally, CSR has boomed as a concept only relatively recently, and so there is no real precedent to see how it might be impacted by a global recession. According to Giving USA, donations did not keep pace with inflation for three consecutive years around that country’s two economic slumps in 1973 and 2001, but similar data for this side of the Atlantic is hard to come by. What’s clear is that it will be a struggle for the corporate commitment to charitable giving, now estimated at a record £1.4bn a year, to hold up.
Reaping rewards
Law firms have an important part to play in beating the CSR drum, and I firmly believe that charitable giving should feature just as highly on the internal agenda now as it ever has done. In my business, working with firms to raise their profiles and distinguish themselves, it is impossible not to notice that budgets are becoming tighter, but also that setting your firm apart from the pack has never been more vital.
The legal profession is an altruistic profession by nature, I believe, and crucially commits as much time as money to good causes through its increasingly active pro bono programmes. If lawyers and support staff do not have enough to do right now, they can devote spare time to making a difference. If the firm can’t commit large sums of money, it can at least commit time and skills to needy projects and communities.
Many charities are finding that it is long-term capital projects that are now becoming the most difficult to keep up, and here firms can make a real difference. Why not pull a team together and paint a local classroom, clean up a disused open space, or help to decorate a nearby hospice? The sense of camaraderie fostered by engaging a group of otherwise disgruntled employees in a meaningful project can make a huge difference to morale when times are tough, and can often result in a boosted enthusiasm when they return to the office.
Indeed, it is team-building exercises that can provide the biggest mutual benefits for charities and law firms in the current climate. I know of one international law firm that now frequently engages in fundraising efforts that bring together teams from across its European offices – whether they are challenged to a charity run, a bike ride or to climb a mountain, the pan-European teams bond over a group endeavour and usually raise a vast sum of money into the bargain.
In this way, charitable giving can have a hugely positive impact on recruitment and retention at a law firm, and particularly if it is well thought-out, well-communicated and well-handled. Even while a firm is laying off staff, it should still support things that will help the business thrive as a long-term operation, and employees who remain will appreciate that. Demonstrating that long-term commitment is a key factor in reassuring staff that you still have their best interests at heart, and increasingly tailoring events or marketing initiatives to include a fundraising or CSR element can foster goodwill at a time when negativity might otherwise take hold.
Law firms are, after all, nothing more than the sum of the people they employ. I believe that law firms will continue to recruit the right senior lateral hires whatever the market conditions, and in order to do so they will need to demonstrate their strengths as an organisation. Existing partners and solicitors who do not make the grade will also continue to be removed as performance is reviewed, and their departures will inevitably threaten morale.
There may be a perception that charitable giving should be reduced at times of recession, particularly when staff cuts are being made, but I believe nothing could be further from the truth. As Reza Motazedi points out: “Some people are influenced by what their employer does in the field of charitable giving, and there is evidence that this can help retention amongst a certain class of employees.”
I would go further. I would say that the day-to-day business of law is all about networking, fostering relationships and maintaining momentum and positive attitude, and the promotion of charitable involvement can benefit all of those activities. Corporate giving will suffer in the credit crisis, of course it will, but law firms would do well to remember the myriad of positive implications that fundraising and pro bono work can have for both the workforce and the client base.
Look back at that CSR programme and the reasons it made sense when money wasn’t so tight. I doubt that much has really changed, and if you can choose the recipients efficiently and convey the message internally to win buy-in, it is likely there have never been more reasons to keep up the good work.
March 2009