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Book Excerpt: How Microsoft leverages employee giving to build a culture of purpose

[Editor’s Note: Akhtar Badshah, who led Microsoft’s philanthropic efforts from 2004 to 2014, writes about the roots and impact of the company’s giving campaign in his new book, This excerpt is reprinted with permission.]

Entrepreneurs have a singular focus—create a great company and make sure the company survives, thrives, and grows. Philanthropy and giving back to the community are not necessarily a priority when the company is young and still on its growth trajectory—especially not in the 1980s. That is why it’s important to delve into how Microsoft launched an employee giving campaign that has continued to grow itself and its impact around the world, creating this “great giving machine” over the past 35 years.

When Bill Neukom showed up at Microsoft as its first general counsel in 1985, he made two critical decisions that have since impacted millions of lives over the last thirty-five years and have been instrumental in creating a program that has inspired thousands of employees to become engaged deeply into their communities. The first was the creation of the Community Affairs Department as part of the legal group that would focus on the company’s philanthropic efforts, and second was the introduction of the employee giving charitable match for every full-time employee in the United States. These two decisions were the moment that enabled many Microsoft employees to not only activate their generosity but become inspired to create their own movements as changemakers.

Community Affairs has two major responsibilities: guiding the company’s direct investment into the community and guiding an employee program to encourage philanthropy. On the employee philanthropy front, the first employee giving effort was launched in 1983 with the United Way at the urging of Bill Gates’s mother, Mary Gates, who was deeply involved with the local and national United Way. She encouraged her son to start an employee payroll-deduction effort so that employees could donate to the United Way and have their donation get deducted bimonthly from their paychecks. With an initial thousand-dollar match, this effort raised $17,000.

“I think that in the early years it was perceived in part as simply an employee benefit,” says Brad Smith, Microsoft’s president and chief legal officer. “And you know this was at a time when companies were not trying to provide free food for everybody in cafeterias and free laundry service and other things that they could generally afford themselves. A free matching gift was something that people might value, and sure enough they did.”

By the time I joined Microsoft in 2004 to head Community Affairs, four additional important decisions had been made that would further fuel the “great giving machine.” In 2002, Pamela Passman was appointed as the corporate vice president for corporate affairs in the law and corporate affairs group.

She made three decisions. First, she convinced then-CEO Steve Ballmer that the employee giving budget should be budgeted as an employee benefit within human resources rather than part of the philanthropic budget. She argued that as the employee base grew and the popularity of the employee giving campaign grew, the philanthropic budget was under constant pressure. Making the giving program an HR benefit would free up Community Affairs funds for ongoing community-based projects. More importantly, by moving the budget within HR it would ensure its permanency and be treated similarly to other employee benefits. According to Passman, “This was the fastest decision that I had seen Steve make. It showed that, at the highest level, leadership was committed to support employees to follow their passions.”

The second decision, also in 2002, was to discontinue processing employee donations through United Way. Even though employees could donate to any eligible US-based 501(c)(3) nonprofit organization in the late 1990s, the money was still processed by United Way and employees paid a pass-through fee. Employees expected their entire donation to go directly to the nonprofit of their choice and not to have to pay this fee. This decision meant that Microsoft started picking up the processing fees. The company was increasing its financial participation in the giving program and increasing employee trust that their donations were having maximal impact.

The third major decision was to extend the employee match to a year-round match. This meant that employees did not have to wait until October to donate and have their donations matched. Now, employees could plan their donations based on their financial cycles and respond to the needs of the nonprofits they supported. Emergencies do not wait, and employees wanted to respond and have their match sent right away.

Bill Gates, in his 1997 memo launching the employee giving campaign for that year, increased the employee match from $10,000 to $12,000. It remained at that level till 2013, when it was increased to $15,000, where it now stands.

The employee giving program is also successful because:

1. The program continuously evolves to meet where employees want to go and creates opportunities that allow them to thrive. Providing employees with an opportunity to use their time, talent, and treasure is critical. Several elements were introduced: opportunities for employees to serve on nonprofit boards and to train them how to serve effectively; an online tool to help employees discover volunteer opportunities easily; and the microvolunteering program. All of these have gone a long way to build that culture of purpose.

2. A strong operational system has been created that ensures employee money flows and is distributed in small amounts to thousands of nonprofits around the world. It is not easy moving money in this way, given numerous national and local government regulations and laws. These laws also change, and one must ensure a strict compliance policy. Further, the operational program also evolved to serve the employees in the most effective way, switching from United Way processing the match and charging a fee to employees to Microsoft picking up the costs of processing the fees and moving to an outside vendor as the program grew; and finally moving to another vendor that could offer the best technology to meet the current needs. These moves are very challenging as they have to be done without any hiccups in the employees’ contributions and their match.

3. The messaging of the program has also evolved over the years. What started off as fun competition between various groups and divisions developed into a very competitive effort. Employees felt they were encouraged to participate, as groups wanted to have the highest participation rate or most money raised. Eventually, the competition aspect of the program was dialed back as it was getting some negative feedback, and new incentives were added to keep the program growing, such as the dollars-for-doers program.

4. The program offerings have continuously evolved to match changing employee needs. Rather than focus on just one month of giving, more microvolunteering opportunities and the Hack for Good were added over the course of the year. For the continued success of any such effort, it is critical the program continues to evolve.

A moment inspired by Mary Gates and launched formally by Bill Neukom has turned into a movement that continues to grow, inspiring employees, providing them with unique opportunities both inside and outside of their jobs to find purpose. In doing so, the movement has impacted the well-being of thousands of nonprofit organizations and transformed the lives of millions of individuals around the world.

“Giving at Microsoft is like getting up in the morning and having coffee,” Nadella says. “It’s habit forming, and I have never seen anything like this. I can mark my years at Microsoft by the giving campaign.”

by Akhtar Badshah, is published by HarperCollins Leadership, as the inaugural release with the .

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