Strategic Alliances: Creating For-Profit and Nonprofit Partnerships

Where once "corporate giving" meant writing an annual check to a favorite charity, more recently businesses and nonprofit organisations (NPOs) have joined forces to achieve their separate, but related missions. When these partnerships crossed the line from engaging in mere transactions to charting a mutual course benefiting each of their strategies, Harvard Business School professor James Austin, head of the School's Initiative on Social Enterprise (ISE), took note.

In his book, The Collaboration Challenge: How Nonprofits and Businesses Succeed through Strategic Alliances, Austin presents fifteen case studies that demonstrate how businesses can strengthen their bottom lines by partnering with nonprofit organizations -- and how nonprofits can use such partnerships to further their charitable work.

For his initial research, Austin studied a core group of five cross-sector alliances: City Year and Timberland; CARE and Starbucks; The Nature Conservancy and Georgia-Pacific; Bidwell Training Center, a nonprofit vocational and technical school in Pennsylvania, and Bayer Corporation; and Jumpstart, a Boston-based NPO that prepares low-income preschoolers to enter kindergarten, and American Eagle Outfitters. The initial research corroborated Austin's hypothesis that these alliances were creating value for themselves and society far surpassing the sum of their parts. He found that most of the partnerships he studied went through three stages of development he terms "the collaborative continuum."

Philanthropic Stage

In the first stage, which some partnerships skip entirely, the organisations assume the traditional roles of "benevolent donor" and "grateful recipient." For example, urban community-service nonprofit City Year began its relationship with Timberland, a maker of outdoor apparel and footwear, when City Year requested fifty pairs of boots for its youth service corps programme. "In the philanthropic relationship," Austin observes, "each side benefits modestly. The NPO receives funding, goods, or services, while the company enhances its reputation as a community supporter."

Transactional Stage

Eventually the relationship may progress to the second, or transactional, stage when the two organisations begin to regard each other as partners. As Austin writes, they start to "carry out their resource exchanges through specific activities such as cause-related marketing, event sponsorships, licensing, and paid service arrangements." For City Year and Timberland, the transition occurred when a cofounder of City Year met with two top company executives to thank them for their donation. "The meeting was important," recalls Timberland marketing vice president Ken Freitas, "because for the first time we realized that there was more here than a typical charitable contribution. There was a real connection. The similarities between what each organization wanted to do and how it planned to achieve its vision were striking." From then on, the partnership intensified in a variety of ways--including Timberland's sponsorship of City Year events and City Year-organised projects for Timberland employees--that made clear their mutual interest in making a positive impact on society.

Integrative Stage

By the third, or integrative, stage of this relationship "resources from both organizations have been mobilized and meshed to create a new set of services, activities, and resources unique to that collaboration," Austin notes. One example of this integration was a 1995 pilot rollout of a new line of Timberland apparel called City Year Gear. Writes Austin, "Value statements like 'Give Racism a Boot' and 'Hike the Path to Justice' were associated with products such as backpacks and T-shirts that were marketed through Timberland's retail outlets, with the profits going to benefit City Year."

While Austin's research underscores the importance of ensuring a good fit between partners' missions, strategies, and values, this alignment may not always be readily apparent. Consider, for instance, the alliance struck between The Nature Conservancy, the largest private owner of nature preserves in the United States, and Georgia-Pacific, one of the world's biggest forest products companies. Encountering mounting difficulties for their respective agendas, the two longtime foes decided to join forces in 1994 to create a landmark agreement enabling both of them to manage some forested wetlands in North Carolina. "Both organizations are deploying their core competencies," Austin points out, "and they have now moved into that third, integrative stage where they're combining those competencies to devise a unique approach to resource and business management."

"Underlying the sustainability and power of a partnership," Austin emphasises, "is the amount of value that's being created through the collaborative process. I have tried to understand sources of value and how the kinds of resources deployed in different types of relationships determine to a great extent the amount of value created. In addition," he writes, "my research reveals that in cross-sector social purpose collaborations, unlike commercial business alliances, an essential ingredient for strong leadership involvement is an emotional connection individuals make with the social mission and with their counterparts in the other organization."

Austin's hope for these new alliances is that "greater interaction will result in productive two-way learning: corporations can be enriched by finding out how nonprofits mobilize and motivate personnel, while nonprofits can learn more about marketing and financial management. As a result," he concludes, "we'll see the stark differences between NPOs and businesses diminish, revealing a new world of integrated, rather than independent, sectors."

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Click here for more information on the book, "The Collaboration Challenge: How Nonprofits and Businesses Succeed Through Strategic Alliances".