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 Leverage Value Benefits Benefits Charitable Gifts Community Investment Commercial Initiatives in the Community 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 skills). 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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