November 2004

Give Something Back

by Terry O’Keefe

Inspired by Paul Newman, the founders of Give Something Back believe in the radical potential of Community Capitalism. Today this Bay Area company is the largest independent office supplies dealer in the Western U.S.

Future historians of the progressive business movement will probably overlook the night Mike Hannigan made his bachelor dinner of pasta and store-bought spaghetti sauce. For Hannigan, however, that dinner was a seminal moment.

The sauce in question was a jar of Newman’s Own®, the flagship product in actor Paul Newman’s philanthropic business empire, where profits are donated to charity. Over his spaghetti dinner that night, Hannigan realized that his choice of sauce had unexpected social consequences. Like most aficionados of Newman’s Own®, Hannigan was just following his taste, but by making that choice, he also was steering profits away from some giant food producer and into the hands of a local charity. And Paul Newman, by bottling a zesty spaghetti sauce that competed in the marketplace on its own merits, had figured out how to harness the energy of the free enterprise system to support his favorite causes.

Hannigan was struck by both the simplicity of this model and its radical potential. Start a business, he thought. Give it a social goal. Do the business so well that it can’t help but succeed. Then stand back and watch the mechanism of the free market support your altruism rather than somebody else’s self-interest. The free market, he realized, doesn’t discriminate on outcomes — it only cares about the process. If you build a great company, you are free to distribute the profits any way you want.

In that flash of dinnertime insight, Mike Hannigan saw that he could combine his lifelong commitment to community activism with his love of business by following Paul Newman’s model. Thus, the idea for the office supplies company Give Something Back was born. Like the Newman’s Own® grocery products business, Give Something Back would exist to earn profits so that they could be given away.

Community Capitalism

Oakland based Give Something Back competes with Office Depot, Staples, and Office Max to sell office supplies, furniture, and equipment to companies and home businesses. Instead of opening retail stores, it uses a delivery business model. Customers shop from a catalog and their order is delivered the next day by a company van.

Since its founding in 1993, Give Something Back has steadily carved out a growing share of the office products market in Northern California. Last year’s sales were just over $20 million and the company has been profitable since its inception. Two things make it unique. First, the company competes with great success against the industry giants. And second, it gives away all of its excess profits to local nonprofits. Last year, the company donated more than $450,000 to community nonprofits, making it one of the most generous corporate givers in America, despite the fact that it is dwarfed in size by its philanthropic competitors.

There are many companies in the world that donate a tiny portion of their profits to charity, while owners and stockholders get to keep the rest. Give Something Back takes the same shareholder profits, sets aside only enough to fund its growth, and gives away the rest. While many companies boast about giving 5-to-10 percent of their profits to worthy causes, Give Something Back, last year, gave 54 percent. Since 1993, the company has donated more than three million dollars to community-based organizations. Over the coming decade, the goal is to donate $100 million more.

The Founding Fathers

Mike Hannigan and his business partner Sean Marx founded the company eleven years ago. Hannigan, who is 55, grew up in southern California and was heavily influenced by the political activism and protest movement that arose out of the Vietnam War. He studied sociology at UC San Diego in a department chaired by Herbert Marcuse, the well-known Marxist philosopher, and went on to UC Berkeley—partly to pursue a doctorate, and partly to steep himself in radical political thinking and political protest. Hannigan admits that he has been committed to political and social activism ever since “working at business during the day and being an activist of one kind or another at night.” One of the things he loves most about his company is the chance to do both at once.

Sean Marx, who is 17 years younger than his partner, was raised in a politically active household in Cambridge, Massachusetts. His parents were anti-war activists, and his father counseled draft resisters. He grew up, as he puts it, “with a strong sense of the fulfillment of community involvement.” Even so, he brought a different motivation to the building of Give Something Back — a deep desire to own his own business.

Marx came to California to play football and lacrosse and to study economics at Occidental College. By his junior year, he’d decided to pursue a sales career as the first step on his path to entrepreneurship. After graduation, he took a selling job at an office equipment dealer in the Bay Area. Mike Hannigan was his first boss. Together, they spent half-a-dozen years building a very successful business for a large corporation — before Hannigan had his Paul Newman pasta sauce epiphany. Post-illumination, Hannigan approached Marx with the idea of starting Give Something Back. For different reasons, it was the business they both had dreamed of.

Paperclips and Principles

Give Something Back is not your typical “cause marketing” company. Some companies (the telecommunications vendor Working Assets is one example) loudly tout their support of good causes as the principal reason to buy their products. But all too often, cause marketing companies sell products that are poorly valued and over-priced. This builds an unfortunate perception in the public mind that high-mindedness goes hand-in-hand with high costs. Give Something Back battles that perception in the marketplace every day.

So, if you ask the company founders whether their social mission is responsible for the company’s success, their answer is a resounding no. “There is no question that some of our customers do business with us because they like what we stand for,” says Marx. “But we think that we actually lose more business than we get because of our social mission. That’s because buyers who don’t know us well often assume that, if we give away so much money, we must be charging them higher prices — in effect, making our donations at their expense. So we have learned over the years to approach new customers on a strictly business basis and to earn their business on the basis of competitive prices, great service, and a better buying experience. If they also like our social mission — well, so much the better. But that’s not how we sell ourselves.”

It’s a business formula that has worked well. Give Something Back has carved out a substantial chunk of the office supplies market in Northern California, while building its most important business asset: a strong core of employees who feel especially nurtured by the company’s high-energy/high-values working environment.

What Lies Ahead

For Mike Hannigan and Sean Marx, the future for Give Something Back is more of the same: Continue to recruit great people who love the company and are motivated to perform and use that energy to carve out an ever-increasing market share for office supplies. Raise $100 million for nonprofits over the next ten years. Out-donate Paul Newman. And be an example for other entrepreneurs and other businesses.

In business — as in most things that we do — outcomes are shaped by intentions. Free enterprise is the most powerful wealth-generating system the world has ever known, and its outcomes are determined by the goals that we give it. We can either use its power to stack the economic deck in favor of the wealthy few, or we can use the profits from selling spaghetti sauce, stick pens, steno pads, and staplers to build stronger communities and better lives.

Give Something Back is built on a simple idea — that we can stand capitalism on its head and use the power of the marketplace to build a better, fairer world. It’s a revolution that even Mike Hannigan would never have envisioned back at Berkeley in the 1970s.

Terry O’Keefe is an Oakland-based freelance business journalist and the Executive Director of the Sustainable Business Alliance. For more of his writing, see his blog at FromthePoint.net