The London Benchmarking Group by 0k5z81n


									The London Benchmarking Group
The LBG Model

The challenge facing the founding members of the London Benchmarking Group was how to
effectively report their community activities to demonstrate that they are indeed responsible
corporate citizens. Effective reporting is best based on solid measures of performance, but in
the 'soft' area of social reporting hard measures are still in their infancy.

Their solution was to devise a tool with which to manage, measure and compare their
relationship with the community - The London Benchmarking Group Model

The LBG Model Summary

Initially, the LBG identified three major motivations behind corporate community involvement:

       a sense of moral and social responsibility, also responding to expectations from society;
       a belief that companies have a long term interest in fostering a healthy community,
        sometimes known as enlightened self-interest;
       the knowledge that community interventions involving employees, customers and
        suppliers can have direct benefits, through increased profitability, stronger company
        image, reduced costs, better employee morale and improved customer loyalty.

The basic model

The motivations were used as a basis to derive a model identifying three categories into which
different forms of community involvement can be classified: charity donations, social or
community investment and commercial initiatives. These are contributions made over and
above those that result from the basic business operations.

Figure 1: Categories of community involvement

The distinct categories are defined to measure how the motives behind community involvement
can impact on a business.
       A charitable gift is given with minimal concern for a return to the business - it is seen as
        the right thing to do.
       A community investment strategy is carefully structured and focused by the company to
        secure some long-term returns to the business.
       A commercial initiative in the community must give a direct competitive advantage to
        the company.
       The business basics category helps clarify the distinction between commercial initiatives
        in the community and everyday activities of a company. These are reported separately
        and not evaluated as part of the LBG model.

Inputs and outputs

The model provides the definitions necessary to put a monetary value on the 'input' costs of a
company's community involvement programmes, whether the contributions are made in cash,
time or in-kind. Combining this with the programme management costs, covering the salaries,
benefits and overheads of staff involved in community relations, enables a total cost of
community involvement to be calculated.

The LBG model then goes further to assess what the programmes actually achieve - the 'output'
defined in terms of:

       leverage of cash and resources from other sources drawn in by the programme;
       the community benefit, such as the number of people in society who benefit;
       the business benefit which accrues.

This approach of assessing the 'input' cost of the contribution and then considering the 'output'
effect of what it achieves for community and company is summarised in the LBG matrix. (See
figure 2)

                                       Inputs      Outputs
                                       Cash                   Community           Business
                                       Value                  Benefits            Benefits
Charitable Gifts
Community Investment
Commercial Initiatives in the

Figure 2: The LBG matrix

The LBG model works well with many other widely used business tools, such as balanced
business scorecards or business excellence models like the Baldridge Award. Indeed the
European Foundation for Quality Management (EFQM) model has a distinct 'society results'
section, where benchmarks of community contribution and environmental impact are essential
to achieving a good score.
Using the basic model

Britain's major telecommunications company, BT, had traditionally reported a community
contribution worth around £15 million a year. This was based only on activities funded by its
central Community Partnership Programme. Applying the LBG model enabled a more detailed
assessment of the company's whole community contribution, bringing in additional elements
such as gifts in kind, employee time spent as school governors, and activities by business
division such as marketing linked to community issues. BT's reported total contribution rose to
over £27 million in 1997/98, confirming its position as Britain's leading corporate donor.

In Italy, Telecom Italia uses the LBG model to identify and then value the major elements of its
involvement activities - totalling Lire 141 billion in 1999, contributed to projects in education,
health and social awareness, culture, sport and the arts. It then uses the approach to
communicate the range of these social commitments to stakeholders through its annual 'socio-
environmental' report.

Using the input/output matrix

SmithKline Beecham uses the input/output matrix to assess several of its flagship international
community programmes. For example, the input contribution to its 'Befriends- Reaching Young
Europe' project (cash, in-kind donations, management advice) are presented alongside the
outputs - government and other funding, children assisted (15,000 in Denmark and 58,000 in
Lithuania, for example), and benefits to the business (enhancing reputation and employee

Diageo used a more detailed version of the input/output matrix, summarising more than ten of
its projects. One example is Guinness/UDV's Water of Life programme: £50,000 was invested
over three years in each project around the world; over 200,000 people in developing countries
have gained access to clean water for the first time; local Diageo companies have gained
improved reputation especially with governments.

Comparing such input costs, and outputs achieved, allows a judgement to be made about the
effectiveness of community involvement programmes. In addition to its use for external
reporting, the LBG model is really a management tool: benchmarking performance, comparing
possible new projects, and considering alternative options and scenarios for the future. By
establishing common definitions of community involvement, of the valuation of inputs and of the
measurement of outputs, it encourages consistency between companies and enables more
accurate and effective comparisons between companies to be conducted.

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