Most law firms I know are very giving from a charitable perspective. This could include altruistic monetary donations, support for client events, support of charitable initiatives involving the firm’s lawyers or staff, or in-house events in support of a charity.
I’m always interested to see where in the budget these activities reside. It says a lot about how the firm views charitable giving, and how it makes those funding decisions.
While some firms don’t delineate in their budget between types of charitable expenditures, I believe that doing so can help a firm to better manage the use of those funds.
Altruistic vs. Business Purpose:
Charitable giving can actually have one of two motivators: it can be purely altruistic, or it can be made for a distinctly business purpose.
An altruistic charitable program is given without direct business purpose or expectation of recognition but rather as an expression of gratitude for past success. A firm will usually set a budget for this line item at the beginning of the year, and send all subsequent requests to a particular individual or committee to decide how those funds will be spent. Altruistic charitable giving programs should be in the firm’s general budget, not as a sub-set of the marketing budget.
Aside from this altruistic giving pocket, in my experience the majority of charitable giving programs for law firms have a business purpose and should therefore reside within the marketing budget. Further, they should be there under two headings: charities and sponsorships.
Unlike altruistic charitable giving, business purpose charitable giving is done for a specific business reason, and with the expectation of recognition either by a client or a target marketplace. An example might include a donation to a favored charity at the request of the firm’s top client. Or the provision of a cheque of support for an organization, on which a client sits on the board. In other words, there is certainly a business purpose for the giving.
Sponsorships are similar in that they are done for a business purpose but in this case, there is the expectation of defined benefits. These can include an ad in a program, a name on the website or other promotion for an event, a foursome in a golf tournament, a speaking opportunity, etc.
I prefer to keep these as separate line items under a marketing budget to allow for tighter management, as the process for each is different.
Using the Budget as a Management Tool
Despite the reality that marketing-related giving has a business purpose, in most firms there is surprisingly little discipline to go with this funding. Money is easily thrown at a request but few firms ensure there is value to the expenditure. For example, seldom does someone confirm the firm received all promised benefits. Firms often don’t require that sponsored events be attended by a member of the firm but if they are in attendance, it’s usually passive. They don’t work the crowd, they don’t have goals for participation/attendance, they don’t prepare a summary report to the firm so the value of the sponsorship so that a proper assessment and determination can be made next time the request comes in.
Budgets aren’t simply ways of keeping track of expenses. They can also help to better manage various aspects of a firm by requiring consideration around the before and after process.
- Marketing – Charities: This includes any donations you are requested to make to support a client’s favored charity, any donations you make due to involvement in that charity by a lawyer or staff member of your firm, or any donation you make simply because it speaks to the firm’s brand and values in some way. Requests should come to the individual or committee responsible for marketing, with a description of what is being requested, how much, and why the individual feels the expenditure would be a good one. I most instances, the only subsequent action on approved requests is to write a cheque.
- Marketing – Sponsorship: This includes any funding to a charitable organization or event but that includes a benefit back to the firm. This benefit could be in the form of tickets, opportunities to play golf, having the firm’s logo at the event in any way, placing an ad in a program, having the firm name on a website promoting the organization or event, or other benefits that clearly identify the firm’s support with that event or organization. Requests should be directed to an individual or committee responsible for marketing. The request should include the event name and purpose, date, the sponsorship level suggested, the list of corresponding benefits, confirmation of who will attend, and the promise of a subsequent report. After the event, the report should confirm the sponsorship and attendance, speak to the value the firm received, and advise if the firm should consider the sponsorship again or not.
Firms should be spending between 3% – 4% of the previous year’s gross revenues on marketing but the amount spent on business-related charities and sponsorship really depends on the firm, its client base and its business goals.
I will say that firms not currently spending the amounts identified above can be nervous to start spending that amount. Adding business-related charities and sponsorships to the marketing budget can help to ease some of this nervousness.
In summary, it makes sense for firms to consider the difference between altruistic and business-related charitable expenditures, and to create a management process around each that meets the needs of the purpose of each line item. The more marketing discipline you place around business related charitable expenses, the greater ultimate value they will have to the firm.
Heather Gray-Grant is a business strategist, marketing expert and executive coach for law firms and lawyers. She can be reached at firstname.lastname@example.org