Sharon is the go-to friend for anyone prepping for a hot new date. She scours the internet for background info on the new prospect, so her girlfriends can avoid the rascals, charlatans and psychopaths. So far she’s discovered one with a wife and kids, another with a taste for unusual cosplay and one with five different profiles on Hinge.
For most charities, their most valuable asset is their reputation. But many enter into corporate partnerships bewitched by the attraction of a big cheque and risk compromising this valuable asset. At the F&P Big4 conference last week, the issue of managing risk was a hot topic. Under pressure to hit income targets, partnerships people can be reluctant to say no. In other circumstances, they are so afraid of compromising the NFP’s reputation that they knock back genuine opportunities.
How do you get the balance right and manage the risk of partnerships sensibly?
Charities need to think carefully about new corporate partnerships and put in place a few basic steps to protect themselves from risks to their reputation.
1. Agree on your no-go areas before you start prospecting
This not only saves time when an opportunity arises but gets the whole organisation thinking about what constitutes a good fit. If you’re a cancer charity, would you partner with an alcohol company? If your mission is to improve obesity, would you take money from McDonald’s? Think about the industry segments or companies that are not a fit with your values or mission and get agreement early on about your boundaries.
The list of no-go areas is usually short, as there are more companies that typically fall into the ‘controversial but…’ category. Risk tolerance is different for every organisation and what might be kryptonite for one is ideal prospecting for another. When we work with veterans’ charities, the armaments and defence industries are hot prospects but off limits for many other NFPs. The issue of alcohol is always a tricky one. Many charities run events where alcohol is served, and alcohol is as deeply ingrained into Australian culture as guns in America. You’ll have to take that beer from my cold dead hand. But the adverse effects of alcohol are a negative for organisations working with cancer, mental health or domestic violence.
In our book Partnerships Reimagined, we recommend you formalise the no-go and controversial areas into a partnership risk policy and get it approved at the board level. Then everyone knows where the guardrails are and there is less likelihood of one department (or board member) going off track. It also enables you to respond promptly to an incoming enquiry and politely decline.
2. Conduct a thorough due diligence
When you are preparing a list of prospects, or responding to a new opportunity, make sure that you do a thorough due diligence research on your new partner. Your research should include their brand, marketing, core activities, alliances, leadership and practices. A basic search of publicly available information should flush out any controversies, lawsuits or thorny issues. Lexis/Nexis is a particularly useful database if you have someone with access to a university or a pro bono legal partner. It will give details of any past or pending legal cases. You can then make a commercial decision on a future partnership, based on solid information.
We were helping a children’s charity with their corporate partnerships when a book publisher approached us and offered to donate proceeds from a new range of children’s books. Sounded promising…. until we did some more detailed checking on this enthusiastic new partner. It turned out their back catalogue included bestsellers called Hot and Horny. Adult erotic books partnering with a children’s charity? Not a good fit!
3. Review the information regularly
If you have an ongoing corporate partnership, make sure you conduct a regular review of the information as things can change unexpectedly. You can make it part of the annual review of the relationship and even better, put a break clause in the contractual agreement to cover any important changes.
For example, a local engineering company was a generous donor to an international aid organisation. It had been a loyal partner for years but then it was taken over by a large multinational whose website boasted of selling “non-standard armaments”. Children in poverty and a company selling weapons? Not compatible, so the charity ended the partnership.
Sometimes it can be tricky if the corporate prospect is a private company with little publicly available information. In that instance, you do what your best with research and ask your prospect to provide the rest. Ask them to complete and sign a due diligence self-assessment. In the event that adverse information comes to light subsequently, you can use it to trigger the exit clause promptly.
4. Establish a clear internal decision process
If you’re going to have a robust discussion with your colleagues about a potential corporate partner, don’t do it in front of them. I recently heard about a prospecting meeting that was going nicely until one of the program people declared unilaterally that the charity didn’t really need the corporate’s money and he wasn’t sure they were the right fit anyway.
Clarifying the decision process for selecting corporate partners and who has the final decision rights is a step that’s continually missed. The partnership manager diligently goes prospecting but hits a wall just when the relationship is warming up. I encountered this with a children’s charity that couldn’t decide whether or not to sign up a bottled water company. The clean water message was countered with the environmental negatives of plastic bottles. It bounced around the charity for 6 months before the corporate walked away frustrated. No one had any idea who had the final decision-making on the issue. Put your framework in place before you go prospecting and don’t risk burning a potentially valuable relationship.
Corporate partnerships offer the potential to deliver something transformational for a charity. Entering into a relationship with eyes wide open is key to preserving the integrity of a charity’s reputation. Spend the time to do your homework, put the risk framework in place and you can secure meaningful partnerships without putting your reputation at risk.
(For a deeper dive into building partnerships that are both ambitious and aligned, check out our book Partnerships Reimagined. It’s packed with tools and frameworks to help you do just that.)