usiness people exercise leadership in the community as well as the commercial world, yet we know little about the magnitude, form, and significance of their engagement in this other leadership arena. In many ways it has been the invisible side of leadership. We know that community involvement is widespread: a 1993 Conference Board survey of 454 companies revealed that over 90 percent have formal volunteer programs for their employees and that 86 percent encourage their executives to serve on boards. But research at the Harvard Business School documents involvement that is deep, important to business leaders and their communities, and clearly beneficial to their businesses (see box below).

A rigorous analysis of the Standard & Poor 500 companies by professors Sandra Waddock and Samuel Graves revealed that strong corporate social performance both benefits from and contributes to strong financial performance in a "virtuous circle." Nonprofits, too, benefit in important ways. Surprisingly, nonprofit executives cite their board members' business skills and managerial perspectives as being more significant than their personal donations or access to corporate contributions.

Human Resource Management

anagers cite specific benefits in recruiting, motivation, professional development, and assessment.

Recruiting. A company's capacity to create competitive advantage starts with its ability to attract talent. Increasingly, graduating MBAs are questioning firms' attitudes and activities regarding community involvement. For employers trying to differentiate themselves, this dimension of leadership may be decisive. Charles Perrin, former CEO of Duracell, explains, "The younger generation wants an involved corporation, a company that is making a contribution. A lot of them have concerns about working with a big company to begin with, so we put ourselves on a more human scale."

Community service also helps companies identify new sources of talent. For instance, Duracell provides college scholarships and internships to African Americans through the National Urban League; 80 percent of those interns end up as employees. Ninety percent of managers surveyed by the Conference Board said that volunteer programs helped them attract better employees.

Motivation. We found a widespread belief among executives that supporting employees' community service activities enhances employee commitment and retention. Financial incentives can be matched by firms trying to lure away managers, so the glue that makes an employee stay is often noneconomic. In the realm of intangible assets, value congruence looms large. A senior executive of a financial services firm says, "It's important to keep the people within my ranks involved and happy in the community to avoid being attracted to move elsewhere. If they have ties with a charity, it's going to be a lot harder for them to uproot and move elsewhere." Community engagement creates exit barriers.

Community service is a form of job enrichment. Studies confirm that volunteer programs significantly increase employee morale, loyalty, and productivity, all of which contribute to enhanced business performance.

 

• Expanding Practice Opportunities. Board service may enable younger managers to engage in tasks such as mission and policy formulation, strategic planning, and resource allocation that they would not yet do in their daily jobs. Many managers report that such experiences -- obtained at lower risk to the company and themselves -- increased their self-confidence as well as skills.

   

   

• Enhancing Core Capabilities. Helene Curtis Inc. has created the "Development Through Service" program to provide "an opportunity for experiential learning that can assist employees' personal and professional development." The company assesses 28 business skill areas (including project management, planning, organization, team-building, and presentation), identifies opportunities for employees to practice these skills through nonprofit involvement, and tracks the process to help employees meet developmental expectations. General Mills and Federal Express found that their community service programs enhanced employee skills in leadership, teamwork, organization, listening, and decision making.

   

   

• Broadening Perspectives. For more senior managers, professional development comes from broadening exposure to people and organizations. The expanded interaction enables executives to escape their insularity. The added stimuli of interacting with more diverse colleagues enriches perspectives and enhances creativity. Breadth of view and understanding are vital capabilities for top leadership.

   

  Nonprofit service helps managers learn to lead when they can't order people to cooperate.

• Learning Collaborative Leadership. William Madar, CEO of the industrial firm Nordson Corporation, sees nonprofit involvement as a way to develop consensus-building skills: "You learn quickly that if you are in charge of a nonprofit's committee, you can't order people to cooperate. It's leadership in an environment where people don't necessarily have to follow. It's these very characteristics that we are trying to nurture within the business." A focus group of senior managers agreed that what they learned most in nonprofit settings is how to work with a diverse group of volunteers. They had to lead with their ability, passion, and conviction, not their formal authority.

Assessment. Community service can reveal an individual's capabilities, values, and attitudes and can sharpen the capacity for initiative, commitment, caring, time management, and organizing. How companies take this into account varies. Only a few of the companies studied had formally incorporated their managers' community involvement into their personnel evaluation process, but almost all the executives indicated that such participation is relevant to their judgments about people. A McKinsey partner provides the firm's perspective: "What we basically do is reward people who exercise leadership in any fashion, and we look favorably upon people who take responsibility outside of work." Another senior executive stated, "It's a way of standing out from the pack in a large organization -- of getting noticed."

Culture Building

n foresighted companies, community service is not an add-on but rather a central force shaping and reinforcing values vital to the success of the business.

Service-oriented culture: empathy and caring. Nordson's William Madar explains how community service helps reinforce the company's culture: "The values that are key to making a responsive organization to customers, to suppliers, and to each other are the very same values of caring that lead to concern for our neighbors and participation in the community. Community involvement is part of the whole. It is integral to the success of the business."

High-involvement culture: making a difference. Boot and apparel maker Timberland Company, whose sales catapulted from $196 million in 1990 to $650 million in 1994, is led by Jeff Swartz. His strategy of "boots, brand, and beliefs" rests on a culture of service, broadly defined: "As a company we have both a responsibility and an interest in engaging in the world around us. By doing so, we offer the consumer a company to believe in and get involved with; we offer our employees a set of beliefs that transcend the workplace; we offer the community an active and supportive corporate neighbor; and we offer shareholders a company people want to both buy from and work for." The centrality of community service to the Timberland culture and its positive effects on attitudes, motivation, recruitment, and teamwork were confirmed in employee interviews.

Crisis glue: cohesion through core values. A corporate culture provides an institutional anchor that stabilizes the organization during storms. In 1995, after years of explosive growth, Timberland had to weather financial difficulties. Its first-ever downsizing was traumatic, but the company's community service commitment helped deal with this, as one manager describes: "The service events last year told people that this was the same company. You have to find new opportunities for people to feel good. You can't give them money. You can't promote them. The service projects were a relatively painless way to do that."

IBM, too, has had to undergo major downsizing, with its workforce and corporate giving dramatically slashed. Chairman Lou Gerstner preserved community involvement as a key principle guiding the restructuring of IBM by focusing on K-12 education. During its downsizing, the company wished to send a signal internally and externally that community participation was still important, so it converted its annual office party into a community service day. IBM managers spoke of such involvement as a source of pride and renewal during a time when the company was widely criticized for poor performance.

Business Generation

ome might consider it inappropriate for individuals or businesses to realize economic dividends from a social contribution. But rather than question motives, we should ask whether such involvement adds value to the nonprofit and its social purpose. If the manager or the company gains at the expense of the community, then exploitation occurs. If both the community and the company gain, then the engagement has made a positive contribution. Private gain is not incompatible with public benefit.

Reputation enhancement. Community service activities enhance a company's image and increase name recognition. A Citicorp executive describes the nature of the reputation-building process: "It's a competitive advantage. It takes a long time to build a sense of "Let's go to Citibank instead of the other guy down the street because they are good corporate citizens." But the feeling that you can trust the company does sway decisions people make." The direct service involvement by employees personalizes the company and creates human interactions that have deeper and more lasting reputational effects than standard public relations methods.

Goodwill banking. A top executive at Duracell saw community service as protecting the business: "What you're always most fearful of is bad publicity. Community involvement builds a little bit of a bank account. The benefit will come the day that something unforeseen happens, an environmental accident or a strike, or something that is going to thrust Duracell into the forefront, when we are going to have to start making some withdrawals from that bank of goodwill that hopefully we have built up over a period of years."

Network creation and relationship building. Involvement with nonprofits expands one's circle of contacts. In many types of businesses, the more extensive one's personal and professional network, the more business that is ultimately generated. Community service creates a distinctive forum and process for developing relationships. Trust is frequently the determining factor in winning a client, and as one Citibanker comments, "Especially on hard-working boards, you develop a rapport with people rooted in respect and trust. Based on these board relationships, people feel obliged to help each other."

Achieving Effective Community Engagement

ommunity service is clearly an integral part of business leaders' lives. Their engagement in the social sector is broad, deep, and personally satisfying. Their activities also yield significant dividends for their companies and therefore merit strong support. The challenge is how to best do this. Actions in five areas will enable companies to achieve more effective community engagement.

1. Integrate community service into corporate strategy and culture.

Companies that have viewed community involvement as part of their core values have harvested greater benefits for the company, the employees, and the community. Those that treat it as a peripheral, public relations function are forgoing value-creation opportunities. The Conference Board survey revealed, for instance, that 77 percent of the companies believe that volunteer programs help them reach their strategic goals.

Many U.S. corporations have been shifting from a traditional charity perspective to "strategic philanthropy," which attempts to integrate corporate donations and community service activities with business operations and interests. But even the term "philanthropy" may be an impediment to full integration. It conjures up passive donation, with the spotlight on "How much are we giving?" The more appropriate question is, "How are we involved and what impact are we having?" Thus strategic engagement better communicates these companies' goals: proactive, deep, and multifaceted involvement that is an integral part of the company's strategy.

For example, Citicorp has made community service an integral part of its global strategy, which is to be an embedded corporation in each of the communities it operates in, part of the institutional fabric. According to top management, this means "assessing the impact of business decisions on the community and mitigating any negative consequences, and engaging in activities -- volunteer and philanthropic -- that help build the community ... all of which supports our global image as a trusted brand name." The company explicitly measures managers' performance on community betterment along with five other key areas. As one executive put it, "We are talking here about how we run our business, not just about contributions, volunteerism, and PR."

This strategy better integrates community service into the corporation's being. Some companies have separate foundations and community relations departments, but they work together, with a common corporate strategy for community engagement providing the guidance. Structure appears to be less critical than process in determining results.

Strategic engagement requires focus. Doing everything would be as nonsensical in the social arena as it is in the marketplace. Priorities should be set, resources focused, and synergies captured. A company should delineate those social needs areas that are most important to its communities and those that have the best fit with the corporation's interests and competencies.

Integrating community involvement with corporate strategy is half the task. The other half is ensuring that such involvement is central to the company's culture. It is clear that values are a powerful force in shaping corporate performance and that initiative, vision, commitment, energy, caring -- the characteristics of those who volunteer in the community -- are the same attributes needed to excel in the marketplace. Community service flows from and fosters the creation of a leadership organization.

2. Make it a top-down and bottom-up process.

The CEO is the molder of the company's values. Coming from the chief belief-builder, the CEO's words and deeds are critical to the creation of a high-engagement corporation. Top management's blessings and active encouragement are essential to mobilizing widespread involvement. Those below listen acutely, and for a leader to say nothing is to say a great deal. Leaders need to be actively engaged in the community in significant and visible ways. Knowing that their CEO is volunteering time for community service increases employee loyalty to the company and its chief executive.

For community engagement to permeate the organization, the process must foster initiative from below as well. One can tap extraordinary amounts of latent energy and creativity by empowering line management and employees as architects and administrators of community service actions. Employee ownership is a prerequisite to institutionalizing such engagement into the company's culture and practices. Nordson, like many companies, created "Community Involvement Committees" in all its operating locations and then made block grants to them from the corporate foundation as a way to decentralize the decision making.

Companies that are implementing strategic engagement generally have created small corporate staff departments with responsibilities for community relations. Such entities can focus and energize widespread involvement. However, challenges exist. Complete delegation to the community relations staff can isolate these activities from the company's core strategy formulation. Effective community relations departments see their role as facilitators, getting line managers and employees to assume primary responsibility. They also foster internal and external communications about the company's community service activities. Although there does not appear to be any inherently superior way to organize these activities, communicating, coordinating, and motivating are critical tasks.

3. Remove barriers to involvement.

There are two main impediments to employee involvement in community service: the difficulties in locating activities and in finding the time to carry them out. Companies can facilitate employee involvement by providing a matching service (either from an outside agency or internally) that takes an inventory of employee service interests and connects them with appropriate nonprofits. There are about 450 Volunteer Centers around the country that recruit volunteers for community service, and there are 70 Corporate Volunteer Councils serving businesses. General Mills's Volunteer Connection program maintains its own database of volunteer interests and service opportunities. Both the contribution and the satisfaction will be greater if employees are engaged in an activity that they care about and that makes good use of their talents. Misplacement can be counterproductive, particularly for board service.

The biggest obstacle the managers cite in their service activities is inadequate time. If companies promote community and board service, then they should recognize that these activities are a valid use of time. Most companies provide paid release time. Some, like Timberland, give an explicit quota of annual work time (32 hours) that their employees may use in service work; others organize single "days of caring." Many simply consider board-related meetings during business hours a fact of corporate life. A small number lend employees to nonprofit organizations or public service for many months. Companies are generally granting employees more time for service activities, with flexibility appearing to be more important than the absolute amount of release time.

4. Enhance volunteer effectiveness.

Employees involved in community work are de facto "company ambassadors," so it is in the company's interest to ensure that they are well trained and supported in their service responsibilities.

Provide training. Particularly for board service, preparation is important. Training that will enable employees to perform more effectively is a form of representational insurance. Most managers' knowledge of boards and nonprofits, however, is quite limited. Local service agencies such as Cleveland's Business Volunteerism Council or Boston's United Way Board Bank sometimes provide training in board service. Publications on board responsibilities and related issues are available from many sources, including the National Center for Nonprofit boards in Washington, D.C. Sometimes the nonprofits themselves will provide helpful orientations to the incoming board members. But too often this is not the case.

Give material support. The executive's service input on a board can be leveraged if the company supports that involvement with a contribution of funds, goods, or services to the nonprofit. Providing an employee-managed fund to cover incidental expenses related to employee group volunteer projects can also increase the quality of the volunteer experience. Providing in-kind services, such as use of copying machines or facilities for meetings, can enhance employees' efforts because they provide access to infrastructure that would not otherwise be available to the nonprofit.

Encourage peer consultation. Executives should have opportunities to share their board service experiences, concerns, and insights with one another, perhaps in special discussion lunches. There is a tendency to keep these activities off-line. Making them an integral part of corporate conversation fosters lateral learning, reinforces the legitimacy and importance of these activities, provides emotional support, and contributes to greater cohesion among employees by providing new grounds for interacting and sharing.

5. Give recognition.

he individual, the corporation, and the nonprofit all benefit from their collaboration. But for these gains to be fully realized, corporations need to integrate community involvement into the company's strategy, culture, and operations. Leaders must set examples through their own service activities and empower employees to initiate and operate involvement programs. They can leverage their employees' impact through policies and procedures that encourage volunteerism and prepare them to more effectively perform social sector duties. As we move into the next century, businesses and business leaders will increasingly play the dual role of creators of wealth and generators of social capital. Their legacy will depend on the ability to succeed at both.