When Mike Hannigan and his business partner Sean Marx started an Oakland office supply company in 1991 called Give Something Back, they pledged to run a decidedly different kind of business that would donate a large chunk of the company's profits every year. Going on two decades, Give Something Back — Northern California's largest independent office supply company — has given away more than $4 million, or 78 percent of its profits, to about 500 community organizations working on issues such as youth employment and hunger. We talked to Hannigan about how a business can serve the community, and why it's important to consider company stakeholders beyond the financial shareholders.
How did the idea for your business model come about?
I'd been aware of this business model through Newman's Own. I was a recently divorced man and I was generally eating things that came in jars and bottles, like salad dressing and tomato sauce. One brand that's available is Newman's Own. It's priced exactly the same as other products, it has a healthy look to it, and it had a sticker on the label that said that all profits are donated to national charities. As a consumer, I was getting the product I wanted without any financial sacrifice, and the profits would go to a national charity.
Sean Marx and I were working at an office machine company and we had been in the business for years. So the light bulb went on: I was going to use the same business model in the office product world.
Our business started with $40,000. We could have donated the money; Sean and I could have each donated $20,000 to a food bank, but we didn't. We invested it into a business and with that $40,000, we've produced millions of dollars in donations and given hundreds of people jobs. That's the power of business, and translating a modest investment into this giant benefit.
What challenges do you face operating under this model?
I'm not sure that this model really is embraced yet. When we knock on the door of a business and we say we're Give Something Back and we're here to sell office supplies, it sounds like we're a nonprofit, so how can we sell products at the same price and quality as Staples? It's still counterintuitive to a lot of people, but less so than before. Once customers realize the value proposition that they're getting from us, they embrace us. But we have to be as good or better than our competition. Our customers do prefer to do business with those that have a positive impact on the community, but they're not necessarily willing to go out of their way. If you don't deliver on time or don't provide good product, then there is no chance for us to succeed. Our customers are businesses, so they don't have the luxury of deciding to spend more.
What were the key components to starting the business?
Two things that were necessary conditions — not sufficient but necessary — is that we created a five-year business plan before we started off. It was not a blue-sky plan. We thought through situations like, if we hire one person, what will they produce? How much money will we need to support the cash flow requirements? We did some serious financial planning. And secondly, we connected with the support organizations that exist out there. My advice is to reach out to networks of support organizations that already exist. Don't try to think it all up yourselves; use the resources of businesses out there that have been doing it for years and they can help you go in the right direction. There is a broad support network that has developed over that last ten years that are specializing in taking companies and moving them in a more socially or environmentally conscious direction.
Why aren't more companies taking a similar approach?
I would turn that question around and say that there are hundreds of other companies now that are doing something like this. This approach of integrating social responsibility and social benefit into the core DNA of a business is proliferating all over the country and the world.
When Sean and I started the business, there were no graduate students knocking on our doors wanting to be managers here. Now they're all over the place. The technical knowledge that is needed to take a company like ours and to continue to grow it is taught at Stanford Business School and Haas and Wharton.
How do you balance turning a profit with making donations?
Our first responsibility is to take care of our customers. If you can't do that, then you will not make a profit and then you can't invest in the community. Once that is done, the goal is to use the business and the assets — the trucks, credit lines at banks, the supply chain — to build the business in a way that lets us leverage our resources that translate into a community benefit.
The latest example is our Paper=Food campaign. We sell a lot of paper to our customers and we encourage them to buy recycled paper, and we've been able to leverage our strength in the business to help food banks. The paper distributor Boise has an interest in social responsibility, and we worked out a program where for every carton of paper we sell, $1 is donated to a food bank in the county where the paper was sold. Since last June, we've donated $79,000, or a half-million meals.
With our trucks, we thought, "How can we use them more effectively?" We send them out full and they come back empty. Well, electronic waste can be recycled. So all of our drivers, when they drop off merchandise, they pick up e-waste. We're certified as a collector, and we hand it off to recyclers and it's not going to a landfill. Did it cost us anything? Maybe a little more in time from our drivers, but they live in the community and they are invested in this, too.
We installed 50-kilowatt solar panels on the building, which is consistent with our business mission and which is consistent with the wellbeing of the community. And it helps us run our business effectively, so why wouldn't we? There are other ways to measure how a company operates in a way that is socially responsible, and in a way that views the stakeholders of a company as the community and the environment, rather than just the financial backers.
What about the employees?
We pay the full premiums on health care for our employees. We feel it's a human right. Some competitors cut health care to keep their stocks competitive, but we made the decision based on a different kind of stakeholder.
We are growing people, hiring them from youth employment partnerships, economic stimulus programs. We are bringing people in and growing them and advancing them from entry-level jobs.
The employees participate in the distribution of profits. The Sacramento office produced 15 percent of the profit, so our Sacramento customers and employees determine where 15 percent of the donations go. They are making a living and in the course of doing their daily jobs, they're doing community work.
How did you become interested in social causes?
My college years were in the Sixties and Seventies. I went to UC San Diego, and there was the anti-war movement and the Civil Rights Movement happening around me. I went out of my middle class, suburban existence and I got involved, and it was imprinted on me. I came to Berkeley for grad school, and then I went through a fifteen-year period just making a living. But I was stamped with this need to do community service, and I did it after hours while I accidentally developed these business skills. And then the time came to see if I had the ability to connect the two.
I didn't go to college saying that business is the tool that I wanted to use to do my socially responsible work. I came to business by accident, and I found a way to connect it to community service. And now, people are coming out of business school specifically to employ this tool in the community. That is powerful.
We started in 1991, and in that ten-year period, it was the fastest period of corporate growth — by any conventional business standard, that was a boom time. But at the same time, public health and education fell apart. The institutions that support the quality of life of the middle class were falling apart at the same time that businesses were amassing wealth.
The conclusion we drew was that there was no lack of resources here in this country; there's an ineffective way of distributing them that don't meet the standards of fairness and equity. What we try to do is change the availability of resources that satisfy human needs, and we go through the marketplace. It was an abhorrence with the status quo that motivated us to do what we did. We live in an abundant society; there should be a better way so that so many people aren't left behind. But rather than be angry, we created an alternative institution.
Ask Janelle Orsi
Berkeley attorney and mediator Janelle Orsi focuses her practice on helping individuals, nonprofits, and small businesses share resources, collaborate, and create more sustainable communities. Orsi is also the co-author of The Sharing Solution, and the co-founder of the Sustainable Economies Law Center, which she started with Small Business Monthly columnist Jenny Kassan. To submit your questions to Janelle Orsi, e-mail them to Bernice.Yeung@EastBayExpress.com by Wednesday, June 16.