Doing good while doing well.

CHARITY MAY BEGIN AT HOME, BUT AN increasing number of CEOs are finding that it barrages them at work through daily requests for donations. Twenty or so years ago, in an effort to give something back to the communities they served, black entrepreneurs were more inclined to practice "checkbook philanthropy." A friend or spouse would come to them with what seemed like a worthwhile cause - usually something near and dear to the heart - and a check would be cut.

But that was then. Today, with everyone tightening their belts, charitable giving requires the same level of tough-minded strategic thinking as any other area of business. There must be an eye on fiscal efficiency as well as measurable effectiveness. This newer, bottom-line approach is called strategic giving.

Like many business executives, Alden J. McDonald Jr., president and CEO of Liberty Bank and Trust Co. in New Orleans, talks a lot about "doing well by doing good." He has been using this approach since Liberty, No. 10 on the 1995 BE FINANCIALS list with $114.9 million in assets, opened its doors in 1972. Like many black entrepreneurs then and now, McDonald knew that resources were limited in the community he served. He also knew that the bank's success was contingent on the success of that community. Applying the theory of doing well by doing good, all of the bank's initial marketing funds were invested in helping to solve community problems.

"With limited dollars, we elected to look at community projects through our marketing eyes," explains McDonald. "Each time we were successful, we not only solved a problem, but we also generated considerable publicity - and lots of new customers." Success also generated lots of new requests for donations, forcing McDonald to consider a more formal program of giving.

Since the '20s and '30s, when wealthy industrialists such as Andrew Carnegie and John D. Rockefeller endowed whatever institution struck their fancy, charitable giving has become more challenging. In the '90s, it's unwise for companies to make donations at the whim of the CEO. Many CEOs continue to make the final decision on large gifts, but it's a good idea to put some distance between them and their companies' contributions. Doing so protects the CEO and levels the playing field for worthy potential recipients who don't have friends in high places. Without a program in place, top executives run the risk of offending their peers at other companies, as well as putting off customers and community leaders. They also want to spend their time making business-driven decisions, not charitable ones.

Many companies have solved this problem by designating a manager to oversee contributions. But the corporate giving manager must have genuine authority to make important decisions about how to commit funds. In addition to sifting through the many requests, the program manager acts as a liaison between the company and the community, bringing together mutual needs. In many cases, he or she will present proposals and decisions to an advisory board or committee, made up of the corporation's senior management. The number of people in this group will vary with the corporation's size, needs and level of giving, but the board's responsibilities include regular meetings to approve or recommend proposals, develop a budget and informally advise the program manager and CEO.

Once McDonald decided to formalize giving at Liberty, he hired a program manager. For the past nine years, Marva Arceneaux and McDonald have worked closely with Bill Rouselle, a partner in Bright Moments, a local public relations, advertising and marketing firm. The program manager's duties include such day-to-day tasks as evaluating requests, planning and executing fund-raising events and coordinating volunteers. Rouselle focuses on advertising and marketing, but he also makes recommendations and many of the decisions. Final decisions are made by McDonald and an advisory committee made up of the bank's senior management.

Small to midsize companies may choose to incorporate their giving programs into their marketing or public relations departments. Or, like Comer Cottrell, CEO of the Pro-Line Corp., a hair care products manufacturer, they may decide to set up a community relations department to coordinate giving.

After choosing a structure, it's important to set a budget and stick to it. In general, the Internal Revenue Service allows a deduction for 10% of a company's taxable income, and the amount often depends on how well the company is doing. According to the Council on Foundations in Washington, in most companies this figure ranges from .05% to 2%. Pro-Line, whose 1994 profits were close to $2 million, averages about $150,000 per year in contributions.

Because money supplies are limited and the demand is high, companies must often find innovative ways to supplement their giving programs. McDonald says that using advertising funds, which are 100% deductible, to market or publicize a fund-raising event, gives a company added value. Take the Liberty Track Meet. In addition to providing scholarships to two athletes each year, the Liberty Track Meet supports an undervalued sport and exposes students to track scouts. The Meet costs about $30,000 to produce, and much of the money is used for media expenditures.

When the local coaches first approached Liberty about sponsoring the event, McDonald needed to justify so large an expense, given his limited funds. His answer? Support a worthy cause while at the same time using the opportunity to market the bank. And by employing his "doing well by doing good" theory, Liberty has attracted other corporate sponsors to the many school programs it supports.

"It's really dullsville if I go to the local telephone company and say, Hey Mr. Smith, I need you to contribute $10,000 to this worthwhile program.' He's going to say, `Get in line with everybody else.' But if I go to Mr. Smith and say `I have some marketing I want to sell you,' there's a different thought process," McDonald says.

Providing needy organizations with products is another way to get more mileage from a company's giving and marketing budgets. As much as possible, Pro-Line, ranked No. 40 on the BE INDUSTRIAL\SERVICE 100 with sales of nearly $42 million, tries to tie in its giving with the products it makes. So if a group of school children is trying to raise funds for a class trip, Pro-Line will give them sample sizes of its products to sell. "It helps them raise money, and it exposes our products," says Cottrell. Or, the company may donate products for children to take to camp. Either way, it's a win-win situation.

Cottrell's philanthropy has won his products exposure in a much greater way as well. In 1991, when bankruptcy and lost accreditation was forcing Bishop College in Dallas to close its doors, Cottrell didn't want to see his city lose its only historically black institution. He used $1.5 million from his company's line of credit to purchase the 131-acre campus.

Neither the local government nor other corporations were willing to contribute time or money to help Bishop regain its accreditation, so Cottrell began looking at small, undercapitalized colleges that could relocate to Dallas. "I wanted to see a college that could develop programs to deliver marketable products - graduates who will make a contribution to the Dallas business community."

Thirty miles away in Waco, Texas, Paul Quinn College, another historically black institution, was also facing hard times. The Southern Association of Colleges and Schools had placed Quinn on probation because its campus was falling apart, and several buildings had been condemned. But with a $1-a-year lease, the option to buy the campus later, and another $1 million from Pro-Line, Quinn's probation was extended. The college relocated to Dallas in April 1991. Cottrell was then able to get assistance from fellow presidents and CEOs in Dallas' corporate community to prepare the school for its September opening. Today, Quinn is fully accredited and paying off the loan to buy the campus.

"I felt that if I took the initiative," Cottrell recalls, "we could develop a partnership [with other donors], but we had to give the leadership." In January 1995, the college board of trustees organized a $21 million - recently increased to $29 million - capital campaign for the college, for which $8.5 million has already been raised.

Cottrell initially became involved with Bishop and Quinn colleges because he felt it was the right thing to do. By setting an example of civic and social responsibility, he attracted substantial outside support as well as a considerable number of prospective customers. "When those students buy our products, they give us an opportunity to reinvest in our community," he says.

Once the administrative aspects of a giving program are in place, it's essential that a corporation establish program goals. Simply put, the goals should answer two questions: What is the purpose of your giving, and what do you hope to accomplish? They are easily answered by examining both the company's and the community's needs, as well as the company's future plans.

Sheila Johnson, an executive vice president of corporate affairs at Black Entertainment Television, oversees all corporate giving and supports a variety of programs that fall in the realm of the company's interests, areas such as health, education, sports and political causes. Its largest beneficiaries, however, are arts organizations like the educational development program at New York's Carnegie Hall and others.

BET, No. 10 on the BE INDUSTRIAL/SERVICE 100 with sales of $97.5 million, has organized televised gala events that feature star artists like Ramsey Lewis and Nancy Wilson, which have raised $150,000 and more for charitable purposes. Recently the company sponsored a Carnegie Hall gala to fund the educational program, which was also a 50th anniversary celebration for Verve Records. "We saw that as something good to do because we're starting a jazz channel," says Johnson. "We have a relation ship with Verve and wanted to help them, because down the road we're going to need them. In that case, we were helping [an important causel and giving BET visibility and a link with Verve."

In the same way that a company sets goals and guidelines for its. giving program, it must also determine eligibility criteria for its recipients. Recipient organizations must be recognized by the IRS as tax-exempt under section 501 (c). A gift cannot be made to individuals, such as students, unless it's made through a tax-exempt organization. A company may also require a recipient to demonstrate financial soundness, substantiated by regular bookkeeping and adequately maintained accounts, as well as proof of how the organization plans to spend the money.

Liberty Bank was recently approached by some students with a proposal for a crime prevention hotline called Kids Save Kids. McDonald agreed that it was an excellent ideal but the students had to explain the hotline's goals, how long the program would last, and what other funding sources they had lined up if they wanted the program to continue indefinitely. "All of those questions are asked for every request, because we don't want to get into a long-term project. We need to get in, get something started, get it on its own and then move on to another project." The bank has committed funds to get the hotline going and will support it for a year. But, adds McDonald, in addition to knowing the program's specific goals and objectives, he wants to see specific results.

Ideally, businesses should print and distribute their criteria, and require contribution requests to be submitted in writing. Such formality and uniformity enables a company to streamline its giving, and weed out unsuitable candidates. BET's Johnson requires a letter that details an organization's needs, goals and objectives and budget. Once she decides to fund a program, she visits the site and works with the organization's administration to set additional goals. After a gift has been made, she makes follow-up visits and receives documentation on the company's progress.

With everything in place, it's vital that a company's giving program get as much visibility as possible to sustain itself and remain effective. "Marketing, marketing, marketing," says McDonald. To back Liberty's "Support our Schools" program, which has provided schools with anything from toilet paper to computer equipment, the bank holds an annual citywide raffle.

"This thing was really getting big, and we were giving close to a quarter million dollars a year," he says. "So we put together a citywide raffle where we paid for all the expenses and raised close to $200,000, which went to 73 schools. We're a Small company, and if we did not use [other] methods, we would not be able to give that kind of money."

Liberty has also established a strong relationship with the local media. The raffle is a huge success each year because it involves not just the bank's participation, but that of its employees and most citizens in the community. Without the support of those who live in the community and other corporate citizens, a giving program can quickly lose steam. This is especially true if a company provides the only source of contributions for a program whose needs exceed the amount a company can reasonably afford to contribute. So it's important not to work in isolation.

When Cross Colours, the Los Angeles company made famous for its trendy and colorful clothing, was at the height of its success in the early '90s, it was also the time that South Central L.A. was trying to recover from economic decay and the riots that followed the Rodney King case. The company, in an effort to provide inner-city kids with hope and a better quality of life, absorbed an existing community foundation called Common Ground, renamed Cross Colours Common Ground. The foundation was administered by the company's marketing director, Cynthia Atterberry, and Fred Williams, who had always served as director of Common Ground. Each month the organization sponsored a different event or program, from back-to-school hair-cutting marathons to Christmas tree giveaways.

In addition to their work with Common Ground, Cross Colours donated funds to support other community needs. "It had a great impact because Cross Colours became known not only as a company that made brightly colored jeans, but we really prospered as a philanthropic company and gained a reputation for that," recalls Atterberry.

Although the company solicited donations from the entertainment community, as well as its vendors and other corporations, it was often difficult to attract other donors. The majority wondered why a multimillion dollar corporation needed their money. As a result, Cross Colours ended up providing the principal support for the foundation. Predictably, when Cross Colours was no longer doing as well, the foundation lost its support. "Look at several possibilities [of funding]," counsels Atterberry, who was eventually laid off. "Maybe if we had solicited another large corporation to support this foundation, we could have carried it further."

Some critics disagree with the concept of strategic giving, and view it as enlightened self-interest. CEOs like Liberty's McDonald disagree. "I think a lot of people go wrong by looking at [a contribution] as simply a donation. If you're really going to get involved with giving and making a difference, you have to have some kind of added value to get excited about."

An added benefit of Liberty's giving program, which focuses primarily on contributions to educational causes, is that the institution now provides banking services for the local teachers' union, the school principals' organization, the New Orleans School Board and several regional colleges and universities. "This is a perfect example of how community outreach and involvement leads to business success," says McDonald.

Given the broad assault on social safety nets taking place on Capitol Hill, there will be a much larger need for charitable support from corporations. Perhaps the real bottom line is that a company can't do good if it isn't doing well.