Building effective corporate partnerships with non-profits

Strategic partnerships offer corporates the opportunity to create business and social value. Here, we look at how companies are adopting more effective ways to partner with the non-profit sector.

• SVA Quarterly
• Advocacy

With the global pandemic, climate crisis and rising inequality, people are increasingly looking to corporate Australia to play a more meaningful role in contributing to society. At the same time, corporates are seeking ways to be more effective when partnering with non-profits to build competitive advantage, attract and retain talent, and maintain their social license to operate. And for a rare few, a commitment to creating impact has become a significant part of who they are and what they want to be known for.

… we share our observations about how some corporates are integrating better practice approaches to partnering…”

As a result of these shifts, we are seeing many corporates adopting a more strategic, long-term approach to partnering with the non-profit sector to ensure that every dollar invested generates more impact. Previous research on best practice giving describes approaches to philanthropic investment along a spectrum of effectiveness.¹ In line with this, more companies are asking how they can partner effectively with non-profit organisations to optimise their impact.

Here we share our observations about how some corporates are integrating better practice approaches to partnering more effectively with the non-profit sector.

How are corporates building effective partnerships?

The Australian Charities and Non-profit Commission defines a corporate partnership as a mutually beneficial relationship between a charity and a business that usually involves a charity receiving funds, goods or services in exchange for something the corporate partner sees as beneficial. These partnerships do not need to be limited to an exchange of value – in fact, they can often see both partners creating new value.²

For corporates, the aim of building relationships with non-profits is to generate business and economic value alongside social value. While corporate partnerships have traditionally offered funding support, many forward-thinking corporates are now collaborating with non-profits to explore ways to broaden the scope and impact of their partnerships.

… this requires both parties to think creatively about how best to move beyond the traditional grant-giver and receiver relationship…”

Corporates have the freedom to leverage a wide array of assets and resources that can benefit non-profits – from skilled volunteers to data and insights. In addition, more corporates are using their voice, networks, convening power and influence to build momentum around a particular social issue. These supports can influence social, economic, and political forces in ways that traditional charitable giving cannot.

However, this requires both parties to think creatively about how best to move beyond the traditional grant-giver and receiver relationship towards genuine partnerships that can help create mutual value and make the biggest difference. We have identified six trends that help corporates develop more effective partnerships with the non-profit sector:

1. Build trusting and transparent relationships from the outset
2. Think beyond traditional funder-grantee relationships towards impact
3. Align what is offered to what is needed
4. Ensure what is asked of non-profits is proportionate to what is given
5. Pay what it takes
6. Talk early and often about the exit.

1. Build trusting and transparent relationships from the outset

While corporates and non-profits are both looking to get something out of their partnerships, sometimes it can seem like corporates hold all the power because they provide the funding. Non-profits can feel unable to speak up when something isn’t working, for fear of jeopardising that funding. This power imbalance can lead to non-profits committing to delivering things that don’t meet their needs or distract from delivering impact.

Understanding the impact of this power imbalance is critical to levelling the playing field.  This can help to build trusting and transparent relationships and is an essential ingredient for unlocking the impact potential of the partnership.

This requires open and honest conversations from the outset to reach a clear understanding of what each party is committed to and capable of accomplishing.”

While much has been written on its importance, building trusting relationships with non-profit partners is not straightforward. It requires funders to consider their culture and values, systems and policies, grant making practices and approach to leadership.³ It also takes a genuine commitment, time and patience.

When it comes to establishing a new partnership, building trust starts with developing a shared vision for how you will work together and what you seek to achieve. This requires open and honest conversations from the outset to reach a clear understanding of what each party is committed to and capable of accomplishing. As the partnership progresses, it is also important to build-in regular check-ins and intentionally create time for non-profit partners to be open about their needs and challenges as well as share what they are learning on the journey. By soliciting feedback, corporates can also gain insights that help to improve the support they provide. Both corporates and non-profits can benefit from taking a step back and listening to one another’s insights.

Macquarie Group Foundation (MGF) drives social impact work for Macquarie Group and is one example of a corporate foundation that has been on a journey to build more balanced, trusting relationships with non-profit partners.

Lauren O’Shaughnessy, Global Director of Impact at MGF, says that the Foundation acknowledges the influence, privilege, and power that funders hold.  “We are making changes to our grant making design, processes and decision-making so they are more inclusive and equitable and take account of the diversity of the communities we support.”

When deciding to refine its Australia and New Zealand grant making strategy, MGF started by articulating a set of principles that would support it to be more equitable in its approach to partnering. The Foundation then used these principles to identify opportunities to improve its grant making processes. The team implemented an expression of interest (EOI) process to ensure their pipeline of prospective partners was not limited to their own networks and relationships.

… we recognise that where one party holds greater financial power it can make open conversations particularly difficult…”

To increase transparency, MGF developed a set of communication materials to share with prospective partners that clearly describes each step in the grant making process and the anticipated level of effort required at each stage. The MGF team also made commitments to support prospective partners, including taking on the burden of completing the application and a pledge to work closely with partners to develop a ‘right-sized’ approach to measurement and evaluation, rather than taking a one-size-fits-all reporting process.

The MGF grant making team notes that trust in any relationship takes time to build. “But we recognise that where one party holds greater financial power it can make open conversations particularly difficult,” says O’Shaughnessy. For this reason, the Foundation commits to multi-year partnerships, so people on both sides of the relationship get to know each other over a period of time, sharing successes and failures along the way.

“We have found that where our grant partners willingly invest in open communication from the outset, it yields far better relationships, and positive collaboration around a solution,” says O’Shaughnessy.

2. Think beyond traditional funder-grantee relationships towards impact

There are opportunities for forward-thinking corporates to move their partnerships beyond the transactional funder-grantee relationship towards transformative partnerships based around a shared commitment to impact.

This requires non-profits to be more creative about how they work with corporates…”

However, this is easier said than done. Some non-profits can find it difficult to shift their mindset from being a grant recipient towards a more commercial mindset that recognises the additional value they can bring to a partnership. And some corporates are faced with competing objectives – for example, the desire to create social value can sometimes be impacted by the demand from within the business to find meaningful volunteering opportunities for employees.

To move beyond the traditional funder-grantee relationship towards a more impact focused partnership, both organisations need to think harder about, be open to, and discuss further what they can offer each other. The honest and open conversations discussed in the previous section are instrumental to this. This requires non-profits to be more creative about how they work with corporates by embracing partnerships as a business opportunity. Corporates also need to think imaginatively about how best to leverage all of the assets and resources at their disposal to amplify their impact.

Challenger is an investment management firm focused on providing older Australians with financial security for a better retirement. As Challenger’s sustainability strategy aims to provide financial security for retirement, it wanted to start a community partnership that would achieve an impact aligned with its business purpose. This led Challenger to focus on underemployment of older Australians by supporting initiatives that reduce barriers to staying in or re-entering the workforce.

In looking for partners, Challenger identified a strong alignment with the Council of the Aging (COTA) NSW. The two organisations had several discussions to better understand each other’s needs and motivations. For Challenger, the partnership with COTA was a chance to leverage COTA’s knowledge and expertise in designing and delivering programs that enhance the economic wellbeing of older Australians. For COTA, the partnership not only provided funding to continue to build the evidence base for what works, but also a strategic opportunity to benefit from Challenger’s brand, networks and position in the market to advocate for inclusive workplace practices for older employees.

… it has been really beneficial in educating our people on the challenges and biases faced by older employees…”

Challenger and COTA undertook a joint initiative at the outset of the partnership, to understand employment challenges faced by people over 50 from the perspective of both Australian employers and employees. This informed the design of a program to help employers implement age-friendly practices. The program includes an education toolkit for managers to address unconscious bias and improve hiring practices, as well as supports to help promote flexible working arrangements and anti-age discrimination policies.

But Challenger didn’t just talk the talk. One of its first steps was to work with COTA to address underemployment of older workers within the business itself. They are doing this by piloting the toolkit to support hiring managers promote age diversity across the business and inform its diversity and inclusion policies. The pilot will take place in early 2023 and support Challenger to meet both its sustainability goals and diversity and inclusion objectives.

Jane Keeley, Head of External Communications at Challenger says that “The partnership with COTA has already created impact in our business – it has been really beneficial in educating our people on the challenges and biases faced by older employees, as well as the opportunities and value they can bring to our workplace.”

3. Align what is offered to what is needed

When agreeing how to work best together, it is important for corporates to spend time understanding the support that is most needed by the non-profit to create the most value for the partnership. One of the key challenges when establishing a partnership is to make sure that there is a good alignment between what the non-profit needs and what the corporate can offer. This is particularly the case when it comes to volunteering.

… many of the traditional models of volunteering, that provide unskilled volunteers on a one-off basis, are not helpful to non-profits.”

Volunteering can be a great way for non-profits to leverage skills from the corporate sector and for corporates to keep employees engaged and motivated. But many of the traditional models of volunteering, that provide unskilled volunteers on a one-off basis, are often not helpful to non-profits.

To build an effective partnership, corporates need to be clear about the type of volunteering opportunities they are looking for and ensure non-profits are frank about what they can provide. If volunteering is important to a corporate, it should be realistic about the non-profit’s ability to engage new volunteers – and consider what support it needs to make it work. Non-profits also need to think creatively about volunteering opportunities that are rewarding for volunteers but that also add value to the organisation. For partnerships to be successful, both sides need to be more honest about what they can offer and what will work.

… intentional matching of skilled Google employees… can effectively enable social impact organisations to build their capability and scale their impact more quickly.”

Google.org is the philanthropic arm of Google that connects social purpose innovators with Google resources (funding, product donations and technical expertise from its employees) to solve complex human challenges and ensure that everyone can participate in the digital economy. Google.org has seen over time that intentional matching of skilled Google employees, such as a dedicated engineer for technology design and development, can effectively enable social impact organisations to build their capability and scale their impact more quickly. In addition, Google.org takes a flexible approach to delivering funding support – allowing grantees to try, test and learn as they develop their programs.

The Property Industry Foundation⁴ brings together the property and construction industries to build homes for homeless youth. As a philanthropic intermediary, the Foundation plays a central role in building an understanding of the housing needs of youth homelessness charities, then matching this with what the property and construction industries have to offer. This includes getting building projects ready for construction and agreeing to fully underwrite the building of each home. It then secures pro bono construction support, skilled volunteers, and in-kind donations of building materials from industry partners for each project. The aim is to build homes that are funded 50% from the Foundation’s fundraising, and 50% from pro bono contributions.

4. Ensure what is asked of non-profits is proportionate to what is given

In addition to aligning what is offered to what is needed, it is also important for corporates to ensure they right-size what they ask of non-profits based on the size of the grant. This is particularly the case when it comes to measurement and evaluation. For example, if a corporate provides a small, one-off grant to a non-profit, the reporting expectations should be minimal, compared to a large scale, multi-year grant.

… it is important to be mindful about the administrative burden non-profits can experience, particularly when they have reporting obligations to multiple funders, including government.”

Understandably, many corporates want to be able to share about the impact of the partnership through their marketing channels. However, it is important to be mindful about the administrative burden non-profits can experience, particularly when they have reporting obligations to multiple funders, including government. So, it is vital for corporates to have open conversations with their non-profit partners about what constitutes a proportionate request to avoid placing unnecessary burden on them.

When the Property Industry Foundation was thinking about its approach to measurement and evaluation, it understood it shouldn’t ask too much of its charity partners. However, it still wanted to be able to understand the outcomes it was contributing to by providing transitional housing. So, the team at the Foundation designed a simple questionnaire for charities to complete that aligned with the types of outcomes its charity partners would be collecting anyway.

The Foundation is now testing the questionnaire with charity partners to understand if the questions are meaningful and aligned to a shared vision for the outcomes both organisations are seeking to achieve without being overly burdensome to report against. The Foundation will then use the feedback to right-size the survey length and ensure the questions are fit-for-purpose.

5. Pay what it takes

To deliver impact, a non-profit must employ people, support them, and have the necessary infrastructure for them to work effectively. These costs have historically been separated out into ‘direct’ costs and ‘indirect’ costs based on whether they can be assigned to a particular project, even though they are all essential to creating impact.

Every project requires both types of costs to be covered to succeed.”

Indirect costs (or overhead) have become a fraught topic in the non-profit sector. Some funders, view indirect costs as wasteful or unnecessary and will choose not to fund organisations which they perceive have ‘high’ indirect costs. Yet indirect costs are essential to running an effective organisation. Recent research by SVA and Centre for Social Impact shows that organisations that spend more on indirect costs are often more efficient, rather than less.⁵

Corporate funders can make significant contributions to the non-profit sector by offering full-cost funding or untied grants. There are many ways a funder can ‘pay what it takes’ – from providing full-cost project funding to untied funding, or capacity-building funding. Which of these models is best depends on the goals of the funder and the needs of the partner. Every project requires both types of costs to be covered to succeed. By having open conversations with non-profits, corporates can get a better sense of how they can best support the non-profit’s work and create the most impact.

Paul Ramsay Foundation (PRF) is one of the largest philanthropic foundations in Australia.⁶  As one of the key funders of the ‘Pay What it Takes’ research, PRF was keen to understand how it could better support partners by paying what it takes. The Foundation used the research findings to develop a formal policy to support indirect costs and grow the capability of its partner organisations.⁷ The policy incorporates an interim standard of 30% of indirect costs for non-profits with flexibility for lower or higher indirect costs where a clear rationale can be shown. PRF plans to review this policy over the next 12 months to ensure it works towards supporting the ‘real’ direct and indirect costs for different organisations, recognising that the range of indirect costs can vary significantly.

6. Talk early and often about your exit

Saying goodbye to non-profit partners is a normal part of the business of partnerships, however managing the end of a funding relationship can often be fraught with tension and treated as an afterthought. An effective exit takes skill, planning and a good dose of strategic foresight. When done well, it can add value to the partnership and leave non-profit partners in a stronger position.

… it is important for corporates to think upfront about an exit scenario that advances the aims of the non-profit partner.”

For exits to go well, it is important for corporates to think upfront about an exit scenario that advances the aims of the non-profit partner. Putting discussions about exiting on the table from the start of the relationship and keeping them there as a predictable phase in the funding relationship can help to optimise the partnership impact. As the partnership end approaches, corporates should have regular conversations about organisational capacity to support a smooth transition. In some cases, corporates might also consider funding business planning support to help non-profits prepare for the transition. Corporates can also play a role in connecting non-profit partners with new funding prospects.

A well-managed exit can create opportunities for both corporates and non-profits to reflect on what has been learned from the project and share this more broadly in the field. It can also be a valuable opportunity for corporates to reflect on and improve their own practice.

… ensure the [partner] organisation is set-up for sustainability and end beneficiaries are not negatively impacted.”

As a young foundation, PRF acknowledges that it is still on a learning journey, but it has already started thinking about its approach to effective exits. The Foundation has developed a set of ‘Principles of Partnership’⁸ to guide how it works with partners. Embedded in the principles is a commitment to ‘set clear and shared expectations for what happens at the conclusion of the grant program.’ To put this into practice, PRF works with partners at the start of the relationship to establish a mutual understanding of what success looks like – this includes a discussion around what a timely exit looks like for the Foundation.

Depending on the nature of the partnership this can look very different – for example, an exit of a research program from a large institution, like a university, will look very different to an exit of a small or early-stage organisation that receives a larger portion of its annual revenue from PRF. In the latter case, as the partnership draws to a close, PRF will have discussions with the partner about what a smooth transition looks like to ensure the organisation is set up for sustainability and end beneficiaries are not negatively impacted. Depending on the needs of the partner, PRF might consider transitional funding support. In other cases, the Foundation might consider funding business planning support to help the partner plan out next steps in the transition.

PRF also has a focus on ‘adding value beyond funding’ – this includes identifying opportunities to create value at the end of a formal relationship. When it comes to measurement, evaluation, and learning, the Foundation seeks to ensure funding support that strengthens the internal capability of partners to manage to outcomes is built into its approach to grant making from the outset. It then reflects on these internally to understand the impact of both the program and the partnership itself. Where relevant, PRF will also seek to create additional value by sharing important lessons from the partnership with the sector to drive conversations and amplify the impact of the work.

Authors: Sally Garis and Anders Uechtritz