Give Something Back, an office supply company with an unusual business model, won two accolades from Inc. Magazine in the same year; it was billed as one of the country's fastest growing companies and lampooned as the worst corporate name in America. I spoke with Give Something Back's Mike Hannigan about a new set of stakeholders, marketplace competition and spaghetti sauce.
Founded in 1991 by Mike Hannigan and Sean Marx, Give Something Back has grown into the West Coast's largest independent office supplier with corporate offices in three cities and 12,000 clients and 40 distribution centers nationwide. You're reading about Give Something Back now, not because of the company's overnight delivery or tremendous selection of recycled products, but because it donates all after-tax profits to nonprofits through a balloting system that involves GSB's customers and employees. Based on Newman's Own business model, Give Something Back has donated more than $4 million (80% of its accumulated profits) to nonprofit organizations in the last 17 years.
Why do this?
Both Sean [Marx] and I had a significant amount of experience in the competitive area of office products. The company we were running was bought by a big multi-national and we had a choice to make. We both felt we could use [the model of Newman's Own] in a competitive, hard-nosed industry to make a profit, but do it on behalf of a different set of stakeholders. We are essentially a giant bake sale serving the nonprofit community.
[The Newman's Own] business model was something I confronted as a consumer buying Newman's Own spaghetti sauce. As a consumer, you choose tastes good and what’s priced right. Here was a product that not only met my needs as a consumer, but met my needs as a citizen and activist. And from a business standpoint, Give Something Back needs to offer the customer exactly what he needs to satisfy his needs. So there’s no sacrifice on the customer's part to choose us.
More and more research suggests that consumers would prefer to do business with companies that have an identifiable positive impact on their communities. So our business model gives us an additional competitive advantage, which our major competitors like Staples and Office Depot don’t have. But it doesn’t relieve us of the responsibility of serving our customers better than they would be served by Staples or Office Depot.
If we want others to engage in cause capitalism business model, we have to answer the big question, "What’s in it for me?" What are the business benefits of an altruist model?
Give Something Back offers a more rounded approach to work for our employees and customers. More and more people are looking to gives something back to their community and make a difference. When we started in 1991, it was an unusual business plan. Seventeen years later, this is becoming mainstream.
Every successful business gives their profits away. Eventually the profits go out as dividends or appreciated stock to the owners. The main difference with us is that we give the money away to organizations that are connected to the well being of the community. And it's not because we want to, it's because everyone wants to. We have a business model that facilitates what everyone would choose to do in the first place; we just make it easy and free of sacrifice. Eighty to ninety percent of consumers say, “If you can prove it doesn’t cost any more and it benefits my community, I’ll buy from you.”
By choosing us instead of another supplier, our customers have the opportunity to help others. That gives us stickiness with our customers that I think other companies don’t have. We have better customer retention than Staples, for example.
As the social ethic begins to demand more responsibility and transparency on the part of businesses, those business that don’t accommodate this new customer need will suffer a competitive disadvantage.
Stakeholders vs. stockholders
Give Something Back is based on the stakeholder interests of the community, rather than the interests of private or corporate stockholders. Our primary stakeholder is the community, so our goal is to use our business to best benefit the community. We evaluate every decision on whether it advances the community, the environment, the employees and the financial viability of the company.
We see the business as being a facilitator for the creation of wealth and a way to transfer that money back into the community.
How does this explain your decision to spend $250,000 on a solar-paneled roof?
The environment is a central stakeholder of the company. The investment is good for the community and we were able to absorb the costs financially, so we did it.
Alchemy of social entrepreneurship: from $40,000 to $4 million
Back in 1991, Sean and I could have donated the $40,000 [we used to seed] Give Something Back to a charity and it would have been a really nice donation, but it would have ended with the donation. Instead of donating that $40,000, we invested it in a business that has produced more than $4 million dollars in donations and will continue to produce hundreds of millions of dollars more in donations as the business grows into the future.
The leverage that that initial $40,000 has to produce something far, far greater is because of the power of business to create wealth through investment in the marketplace. Business has become a tool to accomplish social goals, and this was not something we saw before 1991.
Mike will be speaking at Sustainable Brands 09 in Monterey, California, on June 1.