Design of Indexes for Evaluating Internal and External Effects of Charitable Don

Abstract. This paper mainly discusses the evaluation effect of charitable donation actions of the enterprise, to solve the problem on "achievement" of this kind of donation actions. The evaluation is based on the enterprise's overall perspective, mainly to evaluate the internal and external effects for the charitable donation actions of the enterprise, and its purpose is through the scientific evaluation to find the advantages and disadvantages of this donation actions, and further to guidethe enterprise to establish a correct conception of charity, select the appropriate charitable ways and conduct the professional management to enhance the level of the charitable donation of the enterprise.

Key words:Enterprise; Donation Actions; Evaluation Effect; KPI

In recent years, there have been a lot of lists for ranking charitable donations of enterprises, such as HURUN philanthropy list, and Southern Weekend philanthropy list. With the emergence of philanthropy list, people not only pay high attention to charitable donations of enterprises, and also are enthusiastic towards the charitable donations of enterprises. However, in terms of the charitable donations of enterprises, it does not make any sense conventionally or academically if donation amount is simply used as standard for evaluating and ranking the charitable donations of enterprises. Therefore, a scientific evaluation indexes system for internal and external effects is established in this paper.

1.Principle and Method of Indexes Selection

To determine evaluation indexes, it is necessary to lay a stress on the important principle of SMART. Specifically, SMART comprises of five elements: (1) specific, which requires evaluation to be directed at specific but not general targets; (2) measurable, which requires evaluation indexes are quantitative or behavioral, and also the data or information testing these indexes is available; (3) attainable, which requires evaluation indexes can be realized if efforts are made, avoiding to set up over-high or over-low targets; (4) realistic, which requires evaluation indexes are real, probative and observable; (5) time-based, which requires to attach importance to the specific deadline for the completion of performance indexes.

In this study, two principles are followed: (1) guiding; (2) combination of qualitative and quantitative.

Selection of evaluation indexes is started from four aspects of the development of the charitable donations of enterprises. The key indexes are found with two methods as follows to evaluate the charitable donations of enterprises. First, theoretical analysis is applied. In this paper, the study is started from more than 120 foreign and domestic literatures the author have collected, and then the key points and general indexes for evaluating the charitable donations of enterprises are determined from the effects of charitable donations. Second, expert consultation is applied. Through expert interviews and brainstorming, a collision is formed in terms of ideology, and therefore inspiration can be gained and new indexes are formed.

2.Indexes Selection

Generally speaking, the charitable donations can result in two effects: (1) internal effect; (2) external effect.

Internal effect refers to all kinds of effects brought by the charitable donation actions of enterprises to the enterprises, and is often ignored by people in most cases. With the in-depth study of the charitable donation actions of enterprises, it is found by people that positive effects can be gradually brought by the charitable donation actions to the enterprises. First, they can help increase sales amount of products of enterprises. 78% of consumers think that they are more willing to buy products, which have connections with the public welfare they care about. Second, they can help consolidate brand position. Pringle and Thompson think that brand spirit can be improved if an enterprise or a brand has a tie with relevant charitable organizations or public welfare. Third, they can help attract customers and investors. An academic study, which was made in Depaul University, shows that 100 companies in the list of "Top 100 Corporate Citizens" published in Business Ethics are better than other enterprises on Standard & Poor's 500 Indexes in financial performance. Fourth, they can help attract and retain employees. Therefore, in the evaluation of internal results of the charitable donations, the following indexes can be selected: (1) the role of the charitable donation actions in improving corporate reputation; (2) the role of the charitable donation actions in building up corporate product brand; (3) the role of the charitable donation actions in improving employee loyalty; (4) the role of the charitable donation actions in pioneering market.

External effect of the charitable donation actions refers to all kinds of effects brought by the charitable donation actions to stakeholders of external benefits, and should be positive. Through the conclusion on the external effects brought by the charitable donation actions of domestic and foreign enterprises, it can be found (1) the conditions of objects receiving donations are improved; (2) the social problems specifically pointed in donation program are solved; (3) the communication and contact among government, charitable organizations and communities are strengthened. Based on these, consideration should be given to the selection of indexes of external effects: (1) the role of the charitable donation actions in improving the conditions of objects receiving donations; (2) the degree of helps of charitable donation actions in solving social problems; (3) the role of the charitable donation actions in improving the relationship between government and communities; (4) the role of the charitable donation actions in influencing the donations of competitors.

3.Indexes Correction

The importance of all indexes should be tested, and then the indexes having little connection with evaluation results should be rejected. For importance test, the index system, which is made preliminarily, should be anonymously evaluated with Delphi method. M number of indexes in a layer can be assumed in the indexes system, and P number of experts can be invited to make evaluations on these indexes. Statistical analysis in three aspects can be made after evaluation suggestions are received from experts.

(1)Concentration ratio expressing with

i ― The concentration ratio of expert suggestions on the ith index

― Magnitude of the jth importance degree of the ith index (importance degree is divided into five grades generally, namely m = 5, 4, 3, 2 & 1, representing extremely important, very important, important, ordinary, and unimportant, respectively)

― The number of experts evaluating the ith index to have the jth importance

(2) Discrete degree expressing with standard deviation

is discrete degree of the importance of the ith index, and is a scale measuring importance discrete degree. is smaller if importance evaluation of experts is concentrated, but is larger if discrete.

(3) Coordination degree expressing with coefficient of variation

It indicates the index is evaluated by experts more importantly ifis larger; suggestions from experts are more concentrated ifis smaller. But the two indexes are absolute. Sometimes, the results of and may be inconsistent, in which can be used in this case. The index is more important if is larger, and andare smaller.

Table 1: Statistical Information Related to Evaluation Index Importance of Internal Effect

According to the indexes selected preliminarily in section 2 of this paper, a questionnaire was designed by the author for the evaluation indexes system of internal and external effects of charitable donation actions (see appendix A), and also opinions of all experts on evaluation indexes were collected through the questionnaire. 300 copies of questionnaire were used totally, and 232 (77.33%) were returned. Among returned 232, 213 were valid. The statistical result of questionnaire is shown in table 2.

Table 2: Statistical Information Related to Evaluation Index Importance of External Effect

According to the data in table 1, it is found that discrete degree of most indexes is lower than 1 (

According to the statistical result of questionnaire survey, the sequence of importance of all indexes is shown as follows.

(1) Sequence of the importance of two indexes in charitable donation effect evaluation is from external effect to internal effect

(2) Sequence of four indexes in external effect evaluation is from improving enterprises reputation to building up enterprise product brand, pioneering market, and improving employee loyalty

According to the data in table 2, it is found discrete degree of all indexes is lower than 1 (

According to the statistical result of questionnaire survey, the sequence of importance of all indexes is shown as follows.

(1) Sequence of two indexes in charitable donation effect evaluation is from external effect to internal effect

(2) Sequence of four indexes in external effect evaluation is from influencing donation actions of competitors to improving conditions of objects receiving donations, improving the relationship between government and communities, and solving social problems

4. Establishment of the Indexes System

Through testing on indexes, systems for evaluating internal effect and external effect of charitable donation actions of enterprises are produced respectively, as shown in table 3 and table 4.

Table 3: System for Evaluating Internal Effects of Charitable Donation Actions of Enterprises

Table 3: System for Evaluating External Effects of Charitable Donation Actions of Enterprises

5. References

[1]Ruixia Chen. Charitable Behaviors of Chinese Enterprises and Their Roles in Establishing Harmonious Society. China Development, 2006, (1).

[2]Xiangqian Zhang. Research on Business Enterprise Public-Spirited Activity Management of Harmonious Society. Science Technology and Industry, 2006, (11).

[3]Huijiang He.Motivation and Action Incentive of Charitable Donations. Journal of Shangqiu Teachers College, 2006, (6).[4]Tuan Yang, Daoshun Ge. Corporation and Social Benefit 2. Social Sciences Academic Press, 2005, (32-35).

[5]Stephen Brammer, Andrew Millington. Reputation and Philanthropy an Empirical Analysis [J]. Journal of Business Ethics, 2005, 61: 25-44.