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THE INNOVATION ISSUE

 Table of Contents | Features | Frontlines | Technology | Business

April/May 2009 Issue | Volume 35 Number 3 | Page 53
BUSINESS

FEATURE

SPONSORSHIPS AND CHARITABLE-GIVING PROGRAMS: YOUR FIRM'S RIGHTS TO REALIZING A PROFIT

Ding-dong. Will it be Thin Mints or Caramel deLites ? My earliest sponsorship decision was not whether to buy Girl Scout Cookies, but which flavors to buy. I always felt obligated to buy at least 10 boxes. I knew I was giving to a good cause-and it felt nice to support the little scout standing knee-high at the front door.

Ding-dong. Doorbell again. This time it was our neighbor boy selling magazine subscriptions to help support the Special Olympics. Of course I gave. Who wouldn’t? Like I needed another magazine? But just looking into his eyes was decision enough. Then off to buy a holiday gift for a friend and …

Ding-a-ling-a-ling, the Salvation Army was asking for a donation. It was impossible to say no to the soldier ringing the bell in the freezing cold. Thank goodness on Monday I could escape to the office—oops, only to be met by the kickoff meeting for the United Way Campaign.

These are all sound and well-known institutions that indisputably help us as a society. But is such fragmented giving really effective? At some point we need to ask ourselves, should we give a little loose change to many organizations or some big bills to a select few?

It’s no different in today’s law firm environment, where sponsorships and charitable giving have taken on greater roles in recent years. How many times have you been asked by a client to sponsor a table? Or give to a charity? How many of your partners are being asked to do the same? Are you tracking the $10,000 that you used to buy a table at the annual Women’s Bar Foundation luncheon? Did you consider asking for a speaker’s role? Was the value of the investment commensurate with the benefits offered? Have you set the anticipated ROI for each dollar spent?

If you answered yes to this provocative quiz, bravo. You passed Sponsorship 101. However, if you answered no to one or more questions, it is time to get serious about the planning and execution of your sponsorship and charitable-giving policies (which we’ll simply call sponsorships from here on). These are, after all, turbulent economic times in which every dollar counts.

Getting serious can mean making difficult choices. Firms, especially in smaller communities, tend to spend a disproportionate amount of their marketing budgets on sponsorships. And once a charity has been sponsored, it’s hard to turn down future requests. So firms simply continue giving, adding more sponsorships each year—particularly when potential clients suggest that they’ll more strongly consider using your firm if you donate to their preferred charity.

Given such complications, you can reassure yourself that sponsoring and donating to causes is simply the right thing to do. But targeting your giving to the appropriate causes, organizations and events is an even “righter” thing to do. So how can you determine what the proper course in spending is? To answer that question, let’s address your rights as a law firm that values the importance of giving.

1. The right to set sponsorship guidelines that align with your mission, business strategy and brand. Accounting firms, corporations and major nonprofit institutions are all exercising this right. Why? Because they have found that unless your giving is in sync with your brand, it may very well sink the impact of your dollars. Giving to all kinds of causes may feel good, but it does not reinforce who you are and support what you stand for, or bolster your reputation in the community where you operate.

Without guidelines you have no spending limits. Consider the following examples from two global businesses.

A major pharmaceutical corporation funds organizations that seek to improve:

Access to health and wellness in their communities

Pharmacy education programs and mentoring initiatives

Emergency and disaster relief

A major accounting firm funds organizations that support education and community development programs that:

Bolster the firm’s image as a responsible corporate citizen

Create social, economic and educational opportunities

Help people learn, grow and acquire new skills

This level of guidelines, when applied to your firm’s brand, will help you know which sponsorships to choose from among the many knocking on your office door. Here’s a situation to consider as an example. Imagine you are Smith & Jones law firm, specializing in residential development. The firm’s tag line is “Smith & Jones—Defending Your Affordable Housing Rights.” The entire city knows of your good work and your name is synonymous with the housing market. Two charitable organizations approach you about sponsoring their annual gala. The cost for each is $15,000. The first organization is Save-a-Pet Foundation. The second is Habitat for Humanity. Hmm, which cause aligns better with the firm’s mission and better supports its brand? Where would your investment be better recognized in the business community? Yes, Habitat for Humanity. Save-a-Pet may well be a worthy cause—but it’s not your cause.

Now multiply that example by the hundreds of requests a firm can receive each year. The economy is tough, and your marketing budget is stretched tighter than ever. Sponsorship guidelines enable you to say yes or no without seeming negative toward the causes you turn down. And such a reasoned response is always better than no response at all. The right to remain silent is an important legal concept, but it does not reflect well on the public reputation of your firm.

2. The right to establish a centralized annual sponsoring-giving budget. Establishing a healthy budget agreed on by all partners is critical to the success of a sponsorship program. Often the sponsorship budget is kept separate from the charitable-giving allocations for a host of reasons, including tax ramifications and financial or stakeholder reporting reasons. But seeing all such activities as part of the marketing mix is a wise perspective in budgeting. Touted as the new branding, the new advertising, the new social networking, sponsorships worldwide now account for over $60 billion in company spending. By setting an annual budget for all such activities in your firm, you can better evaluate what portion of total marketing funding should be spent on, say, advertising in relation to sponsorships. In other words, you will be able to measure where the firm gets a better bang for its buck.

Consider this example. You are a litigation firm focusing on family law. There are 100 partners in the firm. Each partner is given $5,000 per year to support a cause that matters most to him or her. That’s a total of $500,000 in giving—but giving in how many and which directions? Partner Jones gives to AmVets. Partner Brown gives to the local Food Depository. Partner Miller to Planned Parenthood, where the firm’s name will be publicized in the newspaper and on signage outside an upcoming event.

Wait, stop right there. Who knew that Managing Partner Grey is writing an anti-choice amicus brief at the request of the firm’s largest client? The client sees the firm’s name in the newspaper and makes a nasty call to the managing partner threatening to pull his business from the firm if it does not withdraw its support for the event. This example is not far-fetched. It highlights what can happen when there is no control of budget and no guidelines in place. Which goes to the heart of the issue: Should the firm give more money to fewer causes or dilute its funding across many?

So how much should you budget for sponsorships? That depends on how well you are managing your return on sponsorship spending. Industry standards suggest that a well-defined sponsorship program can account for 20 to 30 percent of a marketing budget. I recommend start-up operations allocate no more than 5 to 10 percent of their marketing budget to sponsorships until they can measure, prove and reap the full rewards for each dollar invested.

3. The right to negotiate contracts for a better ROI. Need I tell this to lawyers? Often an organization will ask you to support a cause, event or conference and, in return, will list your benefits. Now, back to the example of the annual gala for Habitat for Humanity at a price of $15,000. What are you getting as an ROI? Here is where the fun begins, by identifying the benefits to the firm. Let’s separate benefits into two main categories: tangible and intangible.

Among the myriad tangible benefits, you may at first be offered a logo display, one advertisement in the program, signage, the right to distribute novelties (trust me, at an additional cost) and five seats or tickets to the gala.

If you want more, it’s time to negotiate your requests. For one, you want to know precisely who is coming to the gala—because you want to make sure the five appropriate lawyers are in the right place at the right time, as in face to face with clients and prospects. Thus, you ask for a preregistration list two weeks before the gala. The worst the organization can say is no. But then again, so can you. And what about those intangible benefits, such as being the exclusive law firm sponsor? Or being seated with the chair of the gala, who is also a potential client? Oh yes, indeed—you have wiggle room to negotiate, and smart organizations know it.

4. The right to set and measure ROI. Probably the most frequent question about sponsorships is how to measure ROI. Even more complicated is how to set an expected ROI. Would you sponsor a $10,000 event if you only got $10,000 worth in advertising benefits—a 1:1 ratio of return? Wouldn’t you prefer 5:1? How about if you could get a 10:1 return?

One approach to defining ROI is to establish how sponsorships will be tracked and measured before the event. You may want to begin by orienting the lawyers attending the event—by advising them, for example, that they will need to report on specific metrics such as number of quality attendees, number of leads, potential new matters and increased market presence, and whether the event is worth supporting next year. Each firm, naturally, needs to determine its own metrics consistent with its giving policies and consistent across all sponsorships.

There are both complex and simple valuation techniques you might implement. A simple example is using an ABC method to place a value on a sponsorship, such as this: A = a top-notch ROI, B = a fair ROI and C = a poor ROI. They all lead to quantitative measurement requiring some qualitative judgment about how valuable the sponsorship is and whether or not to renew it next year.

5. The right to renew or sunset. It is imperative to review each sponsorship or charitable gift and place a value on it. Some sponsorship investments are going to receive a C rating. This means that your choice next time is whether to negotiate for smarter benefits or decide not to renew.

Before you use the hatchet, though, take into account the cost of not sponsoring. Would you lose a key client? Would it damage your reputation? If the answer is yes, seriously think about sunsetting out—as in, a gradual, phased decrease in your sponsorship support—rather than making an abrupt exit.

Suppose, for example, you have been sponsoring the Timbuktu Bar Association (TBA) for 10 years at a cost of $20,000 per year. It all started when your number one client became the president of the TBA in 1998. But as time passed after your client’s term ended, your firm continued to give. None of your partners have remained a member, no clients are still active in the TBA, and the events are too far away to attend. Still, as a legacy your firm leader felt it the right thing to continue because the TBA counted on your financial support. Kindhearted? Yes. Smart sponsoring? No!

Sunsetting means to exit slowly, with a defined plan so that neither your firm’s brand or reputation nor the organization you have sponsored are damaged. Smart sunsetting involves strategies that lead to lasting goodwill and relationships. There are a number of techniques. Returning to the TBA, you decide to do this: First, you inform the TBA that this will be your final year as a sponsor at the $20,000 level, and that next year you will offer $10,000, and the following, final year $5,000. Second, you offer to help the TBA find better-aligned sponsors through your connections in Timbuktu.

Well-done sponsorships lead to long-lasting relationships, while having to cease and desist can feel like an unamicable divorce. Sunsetting is an effective way to maintain your brand, your reputation, your goodwill and your clients. Do not take it lightly.

6. The right to sponsor wisely and reap higher returns on your investments. Whether you are a large or small firm, investing your sponsorship dollars in a way that maximizes the return on them and optimizes your investments is just smart management.

Especially in a tight economy, you will want to ensure that your firm is focused on sponsoring causes that enhance your brand and reputation and maximize your potential for sustainable and new client relations. Following the rights outlined here should help significantly the next time several organizations knock on your office door at once.

The harder decision then remains Thin Mints or Caramel deLites.

About the Author

Ellen S. Hattenbach is principal of eHattenbach Consulting, based in Deerfield, IL. Her work focuses on helping organizations get the best return on their client and community investments.

A version of this article appeared in the Legal Marketing Association’s Strategies: The Journal of Legal Marketing in February 2009.

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