Common Cause for the Community

Mike Hannigan believes communities know best how to solve their own problems. He just wants to help supply the resources. That’s why Give Something Back Business Products, the office supply company Hannigan co-founded in 1991, donates the lion’s share of its profits to local charity groups.

As their website shows, the company has donated to a staggering roster of local organizations. The graphic below, charting their year-by-year donations, illustrates the reach of their giving.

In parts one and two of my interview with Hannigan, he described the development of his business model. Today he cuts to the crux of how Give Something Back Business Products selects recipient charities.

Q: Can you describe what you call the “democratic ballot process” by which you choose organizations to which to donate?

MIKE HANNIGAN: The community is served by thousands and thousands of non-profit organizations that are addressing thousands and thousands of different issues. And everyone has a different sense of what’s important in their community. So our goal is not to have the rich and the powerful decide what the community’s needs are. Our goal is to reach as deeply into the grassroots of the community that we serve and ask them, what are the most important issues? And what are the organizations that are doing the best work?

So the way we do that is, first of all, we poll our customers. We’ve got about four or five thousand business customers. Some of those customers have one employee; some of those customers have 10,000 employees. So our goal is to have every customer poll their employees to dig as deeply into the communities of those customers and filter the information up to us. An organization has got to be a 501c3 and it’s got to have a local impact. But beyond that, we solicit organizations for qualifications, and then we distribute the funding according to the votes cast by our employees and our customers in the geographical areas that we serve.

So just to give you an example: 15% of our business right now comes out of our Sacramento regional office, so 15% of our profits are going to be donated to Sacramento-based organizations selected for us by Sacramento-area customers and employees.

So that way, we feel like the true needs of the community – to the extent that they’re recognized by the people who live and work in those communities – are reflected by the donations that we make as a company.

So I don’t have any more influence myself than you would if you were a customer. Frankly, that’s the way it should be. Because I have no more insight into what’s happening in your community than you have into mine.

So in Sacramento, if 10% of the votes come back and they’re for the Sacramento Women’s Cancer Resource Center, 10% of the money that’s associated with that ballot is going to be given to the Women’s Cancer Resource Center.

Think about any corporation. When they make policy decisions or operational decisions, they make them in the context of who their central stakeholders are. Our stakeholder is essentially the community. The community is served by our success.

Hannigan's system is impressive, but what's the sum effect of all these donations? Tomorrow, in the final installment of our conversation, Hannigan describes how the success of Give Something Back Business Products has nourished his ambitious vision for the future of America’s business sector.

Business Outside the Box: Mike Hannigan and the Evolving Landscape of Community-Based Philanthropy

Mike Hannigan didn’t set out to change the world, just his community. In the process, though, he has reconceived the dynamic role of philanthropy in the bare-knuckled world of corporate sales.

In 1991, Hannigan and his business partner, Sean Marx, together founded Give Something Back Business Products, an Oakland-based independent office supply company with a unique catch: GSB donates more than half its annual profits to a wide array of community-based charitable organizations.

At first, the concept sounded outlandish to many in the business world, but Give Something Back Business Products rose to become the most successful such company in the western Unites States, and perhaps more impressively, a noted, award-winning trailblazer in the world of corporate giving. Hannigan himself, still president of the company he co-founded, has become a sought-after speaker, lecturer and expert on subjects of philanthropy, sustainability and social responsibility.

Hannigan recently took a little time out of his busy schedule to chat with Business That Cares. All this week, I’ll be profiling Hannigan and Give Something Back Business Products in a four-part exclusive interview. Today we begin with the inception of the company and the nuts and bolts of its unique model:

Q: First of all, thank you so much for taking the time for this.

MIKE HANNIGAN: Oh, no problem. I’ll pander to the press anytime.

Q: Can you start by telling me about your background before starting the company?

MH: Well, I went to college in the early-seventies as a science student. While I was in college I became involved, like so many students back then, in community service social activism. So during my college career, I developed this kind of commitment to spending a certain amount of my time doing community service. When I graduated from college, I went to graduate school at Berkeley, and then took a job at the Xerox Corporation. And I began this period of time where I had these twin careers. On the one hand, I was making a living in the office products business, achieving various levels of responsibility, and learning more and more stuff about big companies, small companies, startups, mature multinationals, etc. And after hours, I would do my community service work.

And then about 1991, my business partner, Sean Marx, and I decided we wanted to leave the corporate world and do community work, but we didn’t want to make the financial sacrifices people do when they transition into the non-profit world. So we became aware — I became aware, in particular - of the Newman’s Own business model. You know, Newman’s Own spaghetti sauce and popcorn and salad dressing. It was a good choice for the consumer without any kind of financial sacrifice, and there was a big sticker on it that said, “All profits from the sale of this product are donated to charities.” So that showed me that as a consumer, I could make a choice without any kind of sacrifice – financial, or any other quality sacrifices – and achieve this other goal that I would like to achieve, which is to direct some resources back to community service non-profit work.

Hannigan and partner Sean Marx with actor and philanthropist Paul Newman.

So at that point I realized we could do this. We could introduce this same business model, a customer-focused business model, around the office products industry that we were expert in, but do it on behalf of a stakeholder which is the non-profit community, rather than an individual private investor.

So in 1991, we pooled our resources. We had $40,000. And we started out of my house, selling office supplies. And twenty years later, we’re the biggest private office supply company in California. And it’s all based on the business model that business customers are shopping for office products - they want the great price; they want the great service. Whoever offers them that is going to make a profit. All we’ve done is we’ve redirected the profit. Not the payroll, or not the rent, or anything else. We’ve redirected the profit back into the community through our community donation program, which asks our customers and our employees to decide in their communities which are the organizations that are doing the best work and are most deserving. We use the power of the marketplace to take care of customers and earn profit, and then we direct that profit back into the community according to the democratic votes of the people who basically live and work in the community we have contact with.

So it’s a hard-nosed competitive business environment, and we don’t expect to win when we’re not the best choice for our customer, but whoever wins is going to make a profit. All we’ve done is redirected that profit back into the community. And it turns out, of course, that’s just an additional competitive advantage to many consumers. Because our consumers are businesses. They’re not individuals. Their job is to make a good deal for their company. They’re not able to make a sacrifice financially in order to do a social benefit, and so we don’t ask them to do that. What we’re doing is competing on behalf of a different stakeholder, which in our case is the community.

Q: And in a way, you guys are setting such a higher bar for yourself because in addition to being able to donate a large chunk of your profit, you also at the end of the day need to give people lower prices.

MH: Well, so does anyone who wants to win in the office products world. Staples has no problem giving good, low prices and making $1.6 billion in profits last year. We’re competing for those same customers. The customers are demanding the same things from us as they would from Staples, or Office Depot, or any of our competitors. All we’re doing is just we’ve eliminated the stockholder as stakeholder and substituted the community as stakeholder through our profit/distribution program. It’s all based on the power of the market to create wealth. We just distribute that wealth in a way that’s more consistent with most people’s views of how wealth might be distributed in a fairer world.

From its modest beginnings two decades ago in Hannigan’s living room, Give Something Back Business Products has gained incredible traction in the office supply business. Still, many initially viewed its profit-donation model with skepticism. In part two of our interview tomorrow, Hannigan reflects on his efforts to manage perceptions of his new business, and forge a success from his ambitious philanthropic model.

Making Business Philanthropy More Effective

It is hard to believe that a little over a year ago when a friend of mine sent me a link to the website of small restaurant operation in San Francisco, Mission Street Foods. Mission Street Foods began as a food truck and expanded into an operating restaurant twice a week, with all of the proceeds donated towards a designated charity. This happenstance inspired me to create Business That Cares and write my first blog post.

In addition, this past year, I finished the program and received my certificate in Positive Business and Society Change through Case Western University’s Weatherhead School of Management. Part of the program requirements were to submit three stories to the Center for BAWB, Business Agent of World Benefit, for their World Inquiry project, which I also posted on the blog: Replyforall, Better World Books, and GoodCapital. The World Inquiry into B·A·W·B, hosts a global dialogue through the highlighting and sharing of stories of successful business innovations that are making a positive impact on society and the environment on their Innovation Bank site.

As I have learned about hundreds of stories about business philanthropy and have passed on many of them through my blogging and twitter, I have seen the trend for businesses that care; businesses that are agents of positive change for the world, grow quite rapidly. As an example, Mission Street Food is planning to grow to a full time restaurant and is seeking socially minded investors to help them fulfill this vision. In spite of the fact that the economy has negatively impacted business philanthropy, newly socially minded models of business have emerged that help support a variety of important causes . Our goal has been to write stories about these new models for business, such as a B-Corp like Better World Books, a business founded with the purpose of donating a percentage to charity like glassybaby, collaborative businesses like Hotels That Help that involve their customers in donating to causes, or businesses like Blackbaud that were founded with emphasis of strong volunteer programs.

And looking ahead, it seems clear that looking at business philanthropy from an Organizational Behavior and Organizational Development perspective, can help businesses understand how it relates to the overall functioning of the business. Furthermore, a philanthropy program especially one that has an employee volunteer component will benefit from involving HR and OD departments as they can help with understanding and using the correct organizational management principles and tools that will improve the positive impact of the program.

These are some of the organizational topics as applied to business philanthropy that I plan to address in this blog this coming year: how to create the vision, designing innovative and effective programs, leadership development, applying best practices and processes from other business philanthropy examples,employee engagement and volunteering, tying corporate philanthropy with company strategy and direction, developing strategy for the business philanthropy program, group dynamics of team building, building collaboration and cooperation within the context of volunteering, assessing and measuring impact of company philanthropy on the community and on the business.

Business philanthropy seems to be considered as a adjunct activity for many businesses, as in "wouldn't it be nice if we could do something for....". This is to be commended. And now, it's time to start making it really effective.