A nice thing happened on TRW's way to giving its 22,000 defense and aerospace employees more choices as to which charities they can support through donations deducted from their paychecks.
More workers gave more money to more charitable causes. Lots more.
In 1982, TRW workers could give to either an employee-run fund called ECHO (Employees Charity Organization)--which makes grants to charities--or to United Way or to any one charity of their choice. But all of the money withheld from each worker's paycheck had to go to only one organization.
Last year, TRW expanded the giving options, allowing employees to divide their gifts between as many as three charities. The company also allowed significantly more time for volunteers to solicit their co-workers, especially on behalf of United Way. (TRW's Cleveland headquarters office is widely known in the corporate community for its ardent support of United Way.)
The result of these changes was that 70% of the eligible workers made payroll gifts in 1984, up from 55% in 1982.
Further, between 1982 and 1984 the amount of money the eligible TRW workers gave rose 67%, from $634,400 to $1,058,000.
And the number of nonprofit organizations that workers designated as recipients of their gifts jumped 50%, from 1,182 charities in 1982 to 1,778 last year.
"We noticed a significant increase when we went to three choices, both more giving and lots of people giving more money," said Bobbie Love, the TRW employee services supervisor who oversees the payroll deduction plan.
Next year, she added, TRW's aerospace and defense employees may be able to divide their gifts among as many as five charities. Eventually, this may be expanded to 10. The minimum gift is $1 per charity per pay period, she said.
The reaction of TRW employees to the more flexible charity drive followed a pattern first noted in a recently released study by Deborah Kaplan Polivy, a research scientist at Yale University's Program on Nonprofit Organizations.
Her study suggests that if more companies followed the examples of TRW and five other large employers in expanding giving options for their workers, then all charities would benefit. All six companies that Polivy studied have unusual employee giving programs.
Minnesota Firm's Plan
Polivy's study suggests that the TRW approach, which places no limits on which charities may be designated as recipients, may not be optimal. Instead, she suggests a plan adopted by a Minnesota employer allowing donations to federations of charities with similar interests. Polivy said it is easier to educate workers about a few broad areas of interest than about thousands of individual charities.
"What these six companies have really done is ballooned and expanded the giving base a lot faster than if they had just kept the United Way campaign," Polivy said. "I think that is really the key."
Polivy's research suggests that another beneficiary of such plans would be the United Ways, which generally have resisted expansion of payroll giving options that they do not control.
Indeed, the biggest winners in TRW's new policy of expanded giving options were United Ways, which got 75% more money last year than in 1983, Love said.
"United Way's piece of the pie increased from 12% to 18%" of donations, she said.
More Research Needed
Polivy's 74-page report is laced with cautionary words such as "may" and "appears to," and she emphasized the need for more research into payroll deduction plans. It also suggests that the expanded workplace giving has "probably startled United Way into competing more actively for donor contributions."
Joseph Haggerty, the chief staff executive of United Way in St. Paul, Minn., where one of the six companies is located, characterized the study as balanced and well done in the narrow range of issues examined. Haggerty noted that Polivy did not examine long-range employee-giving trends in a competitive environment or the impact of proliferating special-interest federations.
In Los Angeles, Francis X. McNamara Jr., president of the local United Way Inc., said a study of six employers is too narrow to examine the issues.
The United Way board in Los Angeles will not conduct a payroll deduction drive in direct competition with any other federation of nonprofits, except for some long-established instances that were "grandfathered" in when that policy was adopted in 1978.
'Problem With Add-ons'
"We have a problem with add-ons to an existing campaign because usually that does not produce more dollars," McNamara said.
He also questioned the fairness of allowing a single agency or a federation representing a few agencies having equal access with United Way, which in L. A. County represents more than 300 charities.
"In our case, we represent so much of the total community that we have a responsibility such that if a person wishes to make a designation of an individual organization (specifying which charity gets the gift), that is fine; they can make it. But to come in and campaign side by side with United Way is competitive and divisive," McNamara added.
Four Different Styles
Polivy's study--titled "Increasing Giving Options in Corporate Charitable Deduction Programs: Who Benefits?"--examined four different styles of payroll deduction.
One involved allowing federated campaigns (those on behalf of many charities) in addition to United Way, as is done at Bell Laboratories and the St. Paul Companies, an insurance concern.
The second style was having an organization controlled by employees and management collect and then allocate funds to United Way and other charities, such as is done at McDonnell Douglas-West in Long Beach and Torrance.
The third style was that used at TRW's aerospace and defense plants and at Combustion-Engineering, the Connecticut electric power plant designers and builders, where employees have virtually unlimited options.
The fourth style was a company-sponsored plan at AT&T; allowing employees to choose the charity they wanted to benefit, with the company absorbing all administrative and fund-raising costs.
Polivy, who has previously studied United Way policies and practices in admitting new members, said that how well fundamentals of payroll deduction campaigns are applied is a key factor in the success of expanded payroll deduction drives. She said another key factor is how employees perceive management's intent in expanding giving options.
"When a company really makes an effort, boy, can they increase giving" by their employees, Polivy said in a telephone interview from her home in Bloomfield, Conn.
She said that when executives encourage more giving by workers, often "the key motive is 'how do we help the company?' as opposed to 'how do we help the nonprofit world?' " This approach, she said, encourages only limited increases in giving, as workers accede to real or perceived demands from their bosses to participate.
Education as the Key
" . . . if companies don't put the screws to their employees (pressuring them to make donations) and if the emphasis is on helping the nonprofit sector instead of on what giving to nonprofits can do for the company--if the companies want to educate people about the nonprofit sector and why they should want to give--then the giving can really take off," Polivy said. "The whole thing is education."
Polivy suggests in her study that too few giving options discourage donations, while unlimited options are impractical because informed giving requires "knowledge about individual charities that is difficult to impart." Allowing several competing federated drives--as the St. Paul Companies do--may be the best for nonprofits, Polivy said. The Minnesota insurer lets employees give to United Way, to a federated arts fund representing cultural organizations or to the Cooperating Fund Drive, a federation of neighborhood and social activist charities. "Employees can be far better educated about charities when their choices are limited," Polivy wrote.