Contributions to Community
Small business plays a recognized role in the American economy. It serves as a job generator, innovator, producer of niche products and services, and a cap to peaks and a floor to troughs of business cycles, among other things. Less well recognized is the significant role small-business owners play in the social and charitable affairs of the community. The United States has a long tradition of neighbors voluntarily helping neighbors. Volunteer fire departments immediately come to mind as do mutual aid societies and barn raisings. In fact, private contributions to community, whether through donations of time or money, have done much to bridge the nation’s on-going social needs. Small-business owners have been deeply involved in these efforts from the country’s founding. As a result, this issue of the National Small Business Poll is devoted to small-business Contributions to Community defined here as volunteering, in-kind contributions, and direct cash donations to activities and groups whose purpose it is to help others in society.
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Ninety-one (91) percent of small-business employers have contributed to their communities in the last year by volunteering, making in-kind contributions and/or directly donating cash. In fact, 44 percent of contributors or 41 percent of the entire small-employer population say that they did all three. Another 38 percent of contributors or 36 percent of the population say that they contributed in two of the three ways.
A plurality of contributing owners (38%) report that the greatest value of their contributions came from volunteering, but another 37 percent say their greatest value came from direct cash donations and another 21 percent through in-kind gifts (Q#9). However, the ordering is dependent on the assumed per-hour value of volunteered time.
The total quantifiable value of contributions made by small employers to community is enormous. Assuming their time to be conservatively worth $25 per hour, the total amount of donations averaged about $6,600 per small employer, including non-contributors, or roughly $40 billion.
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Nearly three in four (74%) small-business owners say that within the last year they have volunteered their time on behalf of some community or civic group, charity, youth or sports program, school, religious organization, or other activity of that nature (Q#1). Despite the fact that small-business owners are busy people, 42 percent say that they spent more than eight hours (the equivalent of one working day) in the last 30 days volunteering to help at least one of these groups (Q#2). Twenty-four (24) percent spent the equivalent of two or more days in the last 30 volunteering. However, 18 percent who volunteer at some point in the year report that they did not do any in the last 30 days. The average was just over 12 hours or about a day and one-half.
Available time affects the amount of volunteering small-business owners can do. Seasonal factors may, therefore, influence volunteer work, and the amount of time spent in the last 30 days may not be indicative of the entire year. Sixty-one (61) percent say that the last 30 days is typical of the amount of time spent volunteering throughout the rest of the year (Q#2a). However, almost three times as many of the remainder believe their hours volunteering were unusually low compared to those who believe they were unusually high (27% to 10%). Thus, it would appear that the reported average hours spent volunteering in the prior 30 days is somewhat low compared to a typical 30-day period.
A second measure (hours spent being the first) of volunteer intensity is holding an office in an organization for which one volunteers. Thirty-seven (37) percent of those who volunteer (and 34% of the entire population) currently hold an office, including service on a board, in at least one of these groups (Q#3). No details were collected on this type of volunteer activity, but business owners have obvious organizational skills as well as networks that are very useful to charitable (broadly defined) organizations.
Groups of employees often band together on behalf of or in the name of the business to provide a community service. These are typically cooperative ventures between employees and the owner that involve volunteered and on-the-clock time as well as material contributions from employers and employees. Thirty-nine (39) percent of small businesses have such activity on-going (Q#4). Frequency grows with the size of the business. The smallest (fewer than 10 employees) produce such activity in 37 percent of cases compared to 56 percent among largest (20 or more employees).
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b. In-Kind Contributions
Small-business owners frequently make in-kind contributions to help the community. An example of such in-kind contributions is the service station owner who provides a high school group a place, a hose, and water for a Saturday car wash. Another might be a restaurant or fast food place that gives the day’s left over food to a homeless shelter. Even turning over meeting space to a group planning some type of fundraiser is a contribution in-kind.
Seven in 10 (70%) small-business owners provide in-kind contributions to charitable organizations of one type or another (Q#5). The survey did not investigate the types of in-kind contributions involved. However, the survey did attempt to determine the value of these goods and services, though the value of in-kind contributions is difficult to quantify. Owners estimate their median in-kind contribution’s annual value to be just over $2,000 with the average to be about $4,100 (Q#6). A substantial number were reticent to assign a value to their in-kind contributions, but by more than a 2 - 1 margin believe they were worth more than $1,000 annually (Q#6a).
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c. Cash Contributions
Again, 70 percent say that they make direct cash contributions to these types of activities and/or organizations (Q#7). The median annual value of these cash contributions is somewhat below $2,000 per contributor with an average of $3,600. Ten (10) percent say their annual direct cash contributions were more than $10,000 (Q#8). Over one in four (28%) of the largest (20 or more employees) gave that amount.
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Types of Activities/ Groups Assisted
Small-business owners give in one fashion or another to a wide range of activities and their sponsoring organizations. The survey presented 10 generic types of activities and organizations to which they might contribute. Owners reported that in the last year they contributed to 4.7 generic types of groups on average. That does not mean they contributed to 4.7 organizations or activities, or contributed on 4.7 individual occasions. They likely contributed to many more organizations than that and much more frequently. Only 18 percent confined their giving to just one or two types of activity.
Small employers most frequently give to education and/or schools. Seventy-three (73) percent of contributors or 67 percent of the entire population report that within the last year they contributed to education (Q#10G). Given that owners are typically of an age to have children in school, more likely to have graduated from college than the rest of the public, and often complain about the quality of potential employees they interview, their interest in education and schools is not surprising.
The next most frequent types of groups small-business owners support are civic organizations such as local festivals, community promotion, Rotary, Lions, etc., and religious organizations. Both types receive support from 64 percent of contributors (Q#10C and Q#10B) and 58 percent of the total. Fifty-eight (58) percent contribute to athletics or sports activities (Q#10F). About half of contributors (49%) report one or more donations within the last year to human services organizations, including housing and feeding programs, and the Red Cross (Q#10H).
Somewhat less frequently, small employers contribute to the United Way or similar umbrella organizations (39%) (Q#10I), health and disability groups, such as local hospitals (38%) (Q#10D), cultural or arts groups (33%) (Q#10A), and political causes or candidates (32%) (Q#10E). Since the survey was conducted in the third quarter of 2004 and the question’s reference period was the last year, the latter may be atypically frequent given the intensity of the year’s Presidential campaign.
Environmental groups are the least likely type of activity to be supported by small employers. Still, almost one in five (19%) say they contributed to one or more within the last year (Q#10J).
Some contribution patterns appear. If a small-business owner contributed to a civic, athletic/sports, or education/schools group, he or she was also likely to give to the other two (or not give to any of them as the case may be). Similar ties affect political causes/candidates and environmental groups. The third cluster involves health/disability, human services, and the United Way-type umbrella organizations. Donations to cultural/arts and religious organizations appear independent of those to any other activity.
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Reasons for Contributing
Small-business owners make substantial donations of time and money, seemingly much more than do others in comparable situations. Why? The survey posed four questions about the motivation to contribute starting with the most practical reason and moving to the most idealistic. Each was measured on a scale of 1 - 10 where 10 is a very important reason for involvement and 1 is not an important reason.
One motivation could be that involvement in these types of activities is good for business. The survey asked owners how important involvement was to the success of their firms. Just 9 percent said that that reason is very important and another 16 percent assigned it a 9 or 8 on the 10-point scale (Q#11). But 22 percent said that it is not important and another 19 percent gave it a 2 or 3. The average score is 4.8. Those owning businesses employing 10 or more people are more likely to attribute importance to contributions as direct support for business interests.
The second question in the series asked about the importance of involvement to creating a better business climate. Twenty (20) percent said that creating a better business climate is a very important reason and another 22 percent rated it as 9 or 8 (Q#12). The 41 percent total (due to rounding) compares to 25 percent for the good for business response. At the other end of the scale, 22 percent gave a better business climate one of the lowest three places. That number contrasts with 41 percent for direct support of business interests. The average score for creating a better business climate is 6.2. Owners of larger small businesses are again someone more likely to attribute importance to this motivation.
The third question focuses on making the community a better place to live. The proportion citing this reason as very important jumps compared to the good for business and a better business climate motivations. The proportion who say that the motivation is not important similarly declines. Thirty-six (36) percent said making the community a better place to live is very important and another 28 percent gave the reason the next two highest scores (Q#13). Just 3 percent said that the motivation is not important and 5 percent more gave it a 2 or 3. The average score for making the community a better place to live is 7.8.
The fourth question asked about the importance of personal satisfaction and fulfillment as a motivator for contributing. Conversation with small-business owners, particularly successful ones, about participation in community activities routinely leads to the phrase “giving something back.” This motivation is clearly the most important, at least of those to whom it was posed. Forty-one (41) percent of contributors said that personal satisfaction and fulfillment is a very important motivation for their contributions (Q#14). Another 28 percent rated it 9 or 8. Just 4 percent assigned personal satisfaction and fulfillment one of the three lowest scores. The average is 8.2.
While many small employers, particularly those owning larger firms, believe that contributions to community activities and organizations are good for business, their most important motivators are more personal. The more motivations move from direct business interests to personal satisfaction, the more important they become. However, several issues arise in this regard.
One issue is the extent to which family interests are involved. For example, volunteering to coach a sports team may allow a parent to spend more time with his or her children; contributions to a school fundraiser may directly benefit one’s youngsters. Such efforts certainly generate personal satisfaction on the part of the donor, but they are not totally altruistic. Personal benefits from such contributions are unquestionably derived. Still, the variety of activities to which small employers contribute including those from which they are unlikely to obtain any direct benefit, such as housing and feeding programs, indicate that many of the contributions they make are generated for the purpose of helping others.
One point is not clear with respect to contributing for direct business interests: is it that owners just don’t believe recognition yields dividends or that it is not a reason to be involved.
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The contributions that small-business owners make to their communities are reported here in terms of volunteer hours, in-kind donations, and cash gifts. Though not always visible, the cumulative amounts these people provide their neighbors directly and indirectly are enormous. But despite the size of these contributions, they may not be the most important ones that small-business owners make. Instead, leadership and organizational skills may be.
The survey emphasized quantifiable measures of small employer contributions. Leadership and organizational skills are difficult to measure. The one question that did approach the issue indicates that as many as one in three small-business owners serve at any point in time as an officer in at least one community service-type activity or organization. That roughly translates into about 1.9 million Americans helping their communities this way. Other small-business owners will be found serving on committees or in other manners offering their organizational abilities and social networks in service of community activities and groups. These positions are not necessarily offices, but often require skills that can be difficult to locate. Presumably, the people who undertake these tasks substantially augment the efforts of those holding formal positions.
There is little doubt that small-business owners on balance benefit financially from a thriving community and minimal social problems. But those who contribute also encounter a classic free-rider problem, that is, people who do not contribute receive the same benefits (almost) as those who do. The direct financial incentive to contribute is, therefore, not always very great. Yet, despite the free-rider problem and the fact that many take home relatively modest amounts of income from their businesses, over 90 percent of small-business owners do contribute. They contribute because they derive personal satisfaction and fulfillment from doing so.