Future of Philanthropy: FMC Fast Chat with American Express Foundation President Timothy J. McClimon

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In today's episode, we look at how the nature of philanthropy is changing, and to find out what you need to know, We are fortunate to spend the next 30 minutes with Timothy McLeman, the president of the American Express Foundation, which is finding new and innovative ways to support not only nonprofits but small businesses as well. So thank you for joining us today, Tim.

Good afternoon. Thanks for having me.

So let's get right to it and talk about how philanthropy has been changing and trending. And if you want to compare, maybe go back the past year or 18 months, And fast forward into what you see happening short term.

Sure, sure. Well, I'm sure I don't have to tell you the last year has been challenging for everyone around the globe, and it's been challenging for philanthropy as well, whether you're a foundation or a corporation or an individual. I think that most— excuse me— most foundations have taken an approach the last year which is very similar to the approach they would take to a natural disaster. So there are definitely 3 phases that foundations look at after natural disasters. There's the relief phase, the recovery phase, and the rebuilding phase. And last year we were definitely in the relief phase. So we were looking at, you know, what are the immediate needs that people have around the globe related to the pandemic. Those could be healthcare workers, the need for, you know, personal protective equipment, the need for food, food, you know, security, food distribution centers. You know, at American Express, for instance, we gave a lot of support to hospitals around the world to help them purchase equipment. We partnered with Hilton and Marriott to provide rooms, free rooms, to healthcare workers. in certain cities. We partnered then with World Central Kitchen and Rethink Food to provide meals to healthcare workers along with their rooms. So, you know, we took, and I think other foundations took, a real, like, what are the immediate needs that healthcare workers and people have during the pandemic? Now, of course, we're still in the pandemic, but we've kind of moved on to the recovery stage. So what's the next phase of support? And Right now that's looking like economic development, so it's support for small businesses, you know, that really drive the economy in communities, restaurants that are incredibly important to the quality of life in communities and that are job creators. As well as helping nonprofits get back up on their feet and not only continue to provide services, but in some cases, like arts organizations that have been shut down for the last year and haven't been able to produce, produce or present our performances. So that, I think that's the next phase really, is, is the recovery phase. And then in the future, there'll be the rebuilding phase, which is, okay, we've gotten through the pandemic. Now what's happened in the post-COVID world and how do we start to rebuild communities, rebuild economies, in some cases rebuild countries. I think that will be the next phase of philanthropy once we get through this recovery phase.

Okay, can you, can you describe for me a little bit though the internal workings? When we talk about the, the first phase, it sounds like you have to be incredibly nimble and quick in order to be effective. So how do you do that internally?

Yeah, that's, that's, that's exactly correct. We had to pivot very quickly. You know, at American Express Foundation, we, we basically give project support to organizations. We do it in very specific areas like developing leaders and engaging citizens in their communities. And while that work is still important, we had to pivot to start supporting health organizations and hospitals, which we hadn't really supported. In the past, we had supported food distribution centers like food banks and Feeding America, but we really had to pivot very quickly to doing that around the globe where the need arose. And we also had to get away from providing project support to organizations and give them more general operating support, which would give them more flexibility to really respond to the needs in their communities. So That was a very quick pivot. I think we were successful at doing that. I think that for the most part, corporations and foundations were very successful at changing their approach to philanthropy during what was really a crisis last year. But now you're starting to see foundations sort of go back to their priorities that they had pre-COVID, go back to supporting projects where they can be more accountable for the use of their funds. And so you are seeing a return to some of those priorities that we had pre-COVID.

And give people a little idea the size and scope of the American Express Foundation. People recognize the name, and when you recognize the name, people tend to think that means you have unlimited resources and unlimited manpower.

Yeah, that's exactly true. And listen, at the foundation, we have a very specific budget. Every year, it's about $40 million that we make in grants to nonprofits around the world. But the great thing about working for a company like American Express is that we do have all kinds of other resources. First of all, we have 65,000 people that can be deployed to volunteer with organizations around the world. Those people can also give to organizations around the world and causes, and we match those contributions that our employees give to nonprofits. We have other financial resources inside the company, whether they're sponsorship programs or cause marketing programs. We have lots of partners, business partners. I mentioned before that we partnered with Hilton and Marriott to supply free rooms to healthcare workers. We have lots of partnerships that we're engaged in as a business that we can call on to help. So got lots of other resources that individuals for the most part don't have access to, or even foundations that may be really relatively small staffed or have, you know, relatively few people connected to the organization. We've got a lot of people and we can deploy those people in communities and they like to do it, they want to do it, and it's a great resource for us.

Now, has that changed though?

Have you had to even change how people volunteer because of COVID We have, you know, obviously the kind of face-to-face Volunteering, whether you're working in a soup kitchen or in a food bank or, you know, cleaning up a park or a beach. A lot of those activities have had to be curtailed. They haven't stopped, though. Those needs still exist in communities. But, you know, people are more reluctant to gather in large groups. In some cases, they're not allowed to gather in large groups. And so we have had to curtail some of that face-to-face or on-site volunteer activity, and we obviously want our colleagues and employees to be safe in volunteering, but we've pivoted again to more virtual volunteering programs. So our people have a lot of business skills, whether they're marketing skills or strategic planning skills or finance skills that they can use to support not only nonprofits but small businesses. in their communities. And so we have had to really help develop those virtual volunteer programs that have already always existed, but they've been, you know, sort of stepchildren of the bigger volunteer programs that you can do in, in big groups, because virtual volunteering tends to be more solitary, either yourself or in a small group. So we have a lot of partnerships, whether it's with the Taproot Foundation or Catchafire or Strive for College. that we use to help coordinate our virtual volunteer programs around the world. But that work has really taken off, and I think that not only are people working remotely and we're doing programs like this remotely via Zoom, but you can use that technology to really assist causes and nonprofits and even small businesses in your communities.

I want to focus on nonprofits right now, but I do want to get into the small business aspect because I think that's really cool in that you encompass both sides of the equation, because usually when people think of philanthropy or giving, it's strictly to a 501 nonprofit. So to be able to add small businesses into the mix, the businesses that we find on Main Streets that really are the heart of communities, it's an overall economic impact that, that you're going for there. So that to me is very interesting.

Yes, that's absolutely right. I mean, we still do it through nonprofit organizations, you know, because we don't give money directly to for-profit businesses. That wouldn't be a charitable activity, and we are a charitable organization as a foundation. But there are lots of nonprofits out there who have economic development or historic preservation or, you know, leadership development You know, or social justice missions that are all appropriate to support small businesses and restaurants in their communities as well. So we really, you know, rely on partnering with nonprofits who have missions that encompass those kinds of for-profit businesses so that we can funnel our money through a nonprofit. And then it ultimately may go in part to for-profit businesses, but it's in furtherance of the charitable mission of the nonprofit.

Okay, and how do you pick what kinds of nonprofits or what types of work, project work that you will support? Where does that idea come from?

Well, it happens a couple of different ways. The main way is we react to proposals, right? So nonprofit organizations come to us. They know about us. They know about American Express. They know about the American Express Foundation. They come to our website. They read our guidelines and our priorities and our themes. They fill out an application form. I have team members who read those proposals and make decisions about whether to pursue them or not. So we are— we do react to applications, but we also take a proactive approach. So we have very specific things that we want to accomplish as a foundation. I mentioned leadership development. For instance, we are interested in training the next generation of nonprofit leaders, so we are focused on, you know, providing leadership training for high-potential emerging leaders in the nonprofit and social sector. So yes, we give grants to nonprofit organizations to do that, but we also go out and partner with organizations. We seek them out and we develop partnerships with them to help further that objective as well. So One of those partnerships, for instance, is with the Center for Creative Leadership that's headquartered in Greensboro, North Carolina. They are one of the primary service providers for for-profit companies as well as nonprofits, and we developed something called the American Express Leadership Academy, which is a week-long training program where we use trained professionals from CCL, certified executive coaches. from CCL and some of our own business leaders from American Express with a week-long training program that's highly disciplined, highly focused, targeted towards specific kinds of nonprofit leaders. And we developed that program together, we manage it together, we, you know, work on it together, we meet together, we're responsible for it together. So it's a real partner And we have a number of those kinds of partnerships that we've proactively sought out over the years.

Okay. And I know leadership also dovetails into service overall, and that seems to resonate throughout what the foundation does— service-oriented work. How does that relate to American Express as a whole? There, there must be some history there that makes all of this authentic to your brand, is what I'm getting at.

Yeah, well, most people don't know this, but American Express actually started in 1850 as a parcel delivery service. So think about, you know, Federal Express or UPS, but in the days of the Pony Express and horse-drawn carriages. At the time, the US Postal Service would not deliver parcels. They would only deliver letters.

Mm-hmm.

And our business started in Lower Manhattan, as a parcel delivery service, and it grew over the years into a travel business and then a financial services company. But right from the beginning, we were there to serve people, right? So you had to entrust your parcel with us. In some cases, that was money that you wanted delivered someplace else, and you were entrusting American Express to deliver that parcel to the individual that might, or business that might be clear across the country. And we did that, you know, with horse-drawn carriages and trains and eventually, you know, other kinds of transportation vehicles. But right from the beginning, we were a service company. We provided service. So service has always been sort of our middle name. At American Express, we pride ourselves on service. We think it's honorable to serve people, and so serving customers and serving communities go hand in hand. Almost from the beginning, we wanted to serve communities as well as customers. We made our first grant in 1862 to help victims of a fire. in Boston. In 1885, we had our first employee giving campaign where we asked employees to contribute money to help build the pedestal for the Statue of Liberty in New York Harbor, and employees, you know, donated change to help do that. Our foundation was created in 1954, which is 4 years before the first American Express card. was created. And so, you know, we've had a long history of doing this as a company, and we think that, that service is, is critically important to our customers. It's critically important to our communities, and we think it's one of the things that differentiates us from, from our competitors and from other companies.

Okay, and corporate social responsibility, that also falls under your domain there. At the foundation. I'm wondering, how does that play into it if you're looking at organizations to support? Do you look to see if they have those types of jobs in place, or do you see a lot of growth happening within that kind of role?

Well, rolling out, yeah, corporate social responsibility really refers to how companies operate their businesses. And so where philanthropy is really important, cash is, you know, important to get to nonprofits and to communities and causes. Corporate social responsibility is really how, how do we operate, you know, as a business? How do companies operate? What kind of governance structure do they have? How transparent are they? How environmentally friendly are they? How safe are their products and services? How do they treat their employees? Do they have a commitment to diversity and inclusion? What kinds of suppliers do they use? Where do they purchase? things from, what communities are they in. So these are all things that companies do as citizens in their communities. And corporate social responsibility, which includes philanthropy, is much broader than philanthropy and is really not only about what we give, it's about what we do as a company. So we're not alone in this. Many, many, many companies around the world are engaged in corporate social responsibility, and, and it's something that we think is important as citizens of the world that we operate our business responsibly. But we do that through many means, whether it's philanthropy or engaging our employees in communities or being environmentally friendly, cutting our carbon emissions as a company. So there are many, many ways of being responsible.

Okay. All right. So let's segue a little bit now into small businesses in particular and ways to support them. Because I do remember maybe about a year ago where if I used my American Express card at my pizzeria, I would get $5 back. I believe if I spent $10, I would get $5 back, which is a pretty huge bonus when you think about it for the amount of money being spent. So somewhere along the way, you came up with an idea to do that. So if you can give some background on how that started and then go forward into the kinds of things you're doing now?

Sure. Well, it was really during the financial crisis, so we're, you know, go back to 2008, 2009, and what we are hearing from our small business customers, our small business partners, is that they needed customers. They needed customers to come through the door, or they needed customers to come to their websites online, and they were hurting, you know, as part of the financial crisis. So You know, we thought about how do you support small businesses. Yes, we could do advertising around small businesses, get out and, you know, and shop, you know, small, what we call shop small or shop local. But what can we do to really drive customers? So Thanksgiving was coming up. You know, Black Friday, of course, is, you know, a huge shopping day where people go to big box stores and department stores. particularly at that time, and make purchases. There was Cyber Monday. That was really when people went online and got bargains to shop online. So someone, a colleague, came up with the idea of Small Business Saturday, sandwiched, sandwiched between Black Friday and Cyber Monday. And, you know, we put that program together very, very quickly in just a few weeks. And as part of that program, we offered our customers a credit if they went out and shopped at small businesses. We would give them— initially it was a $50 credit if they went out to their local stores on Small Business Saturday. And we've continued that program for the last 12 years. That program has expanded all over the globe. There are Small Business Saturdays now all over the globe and countries, uh, because we did a really smart thing, I think, and that's that we didn't attach our name to Small Business Saturday. So we didn't say this was the American Express Small Business Saturday. This was, you know, really about driving customers to small businesses. And so we didn't care if you used a competitor's credit card. We didn't care if you used cash. We wanted you to use the American Express card, which is what why we gave customers an incentive to do that with a credit. But we really— it was all about driving business to small businesses, and that's why the program has been successful and has been embraced by governments, local governments, national governments, and other entities around the world. But as that program has developed, it's really developed into more of a year-long program that we call Shop Small. We have just recently created a program called Dine Small, which is all about supporting your local small restaurants that are struggling in communities. And not only do we have Small Business Saturday, but we now have Takeout Tuesdays. And Takeout Tuesdays is really about encouraging people to, you know, get delivery or takeout at their local small restaurants during the week. So we've tried to think of clever ways of supporting small businesses and restaurants in communities and really driving people to them, driving customers to them. And I think that's been one of the more successful, you know, service activities that, that we've been engaged in. It's really serving our communities and serving those small businesses and restaurants.

And how are, how are these ideas coming to you, though? I mean, are they things that are just bubbling up from the staff or just you walking around the streets saying, you know, there's a problem there, we need to think about what to do?

Well, in that particular case, Small Business Saturday, that was, that was an idea of somebody at American Express who just had that idea and took it to his boss, and who was my boss at that time too, Tom Schick. And Tom embraced it and sold it into the company to our CEO at that time, Ken Chenault. And it was kind of an easy sell as a way of creating something and founding a movement, if you will. So some of those things are generated inside the company. Some of them are ideas that are brought to us by nonprofits or other businesses. So we're sort of agnostic. We'll take good ideas and run with them, or we'll help create good ideas, but we love to create partnerships. I mean, that is one of the things that's really strategic to our business is having partnerships with other companies. So we've tried to, when we've created programs or joined programs, we've tried to do them as partnerships. So I'll just give you another example if that's okay.

Yeah.

So last year, you know, as a result of really the social justice movement, we were looking for a way of supporting Black-owned small businesses. And at the time, the U.S. Chamber of Commerce Foundation had a program to help save small businesses, and it was a grant program that they had gotten some money from some foundations and corporations to institute. They had built a platform to do that, but we went to them and said, listen, we, you know, we'd love to do something that's specific to Black-owned. small businesses, will you help us do that? And they said, great, we have a platform already, we can pivot there very easily. And, you know, we said that, you know, we'd love to, to do this with you, but we also want to do it with a broader coalition of organizations. And there are 4 national Black chamber organizations, and we helped the chamber create a coalition of these 4 Black chamber organizations and the U.S. Chamber of Commerce Foundation, which is the first time they've ever worked together in a coalition. And we put that together and committed $10 million to it initially. But again, just like Small Business Saturday, we didn't want to own it because we wanted other businesses to join us. So we created the Coalition to Back Black businesses. And now 5 or 6 or 7 other companies have joined us and put money into the coalition to support these businesses. So that's kind of the way we like to operate. And whether it's our idea, somebody else's idea, we really like to do it as partnerships.

Okay. And how does someone become a partner? I do have a question asking, do you work with universities or colleges? Or are they excluded from what you would consider a partner?

No, no, we're— we have all kinds of partnerships, uh, but, but certainly we've had longstanding partnership with UNCF to support, uh, historically Black colleges and universities. We've got a longstanding partnership with Hispanic Scholarship Fund to provide scholarships to Latinos and Latinas in communities. So we have a number of, of partnerships with educational organizations and colleges, universities. But again, some of it is people coming to us with ideas that they would like us to support or join them on. Sometimes it's other companies or foundations coming to us with ideas. Sometimes it's us generating the idea and going out and seeking partners. But, you know, we, we don't— we very seldom do anything alone, right? We very seldom do something that's just American Express. We really try to partner with other organizations, associations, nonprofits, businesses, our own business partners, because we just have more impact that way.

Okay. All right. We actually have to wrap up, but I want to make sure the takeaway is going forward what you're looking for. You're— are you back to leadership, diversity, and inclusion? Would you say that fairly represents Your goals?

Well, we're definitely interested in diversity inclusion, and we do want to support organizations that are led by people of color and other represented groups, but organizations that are promoting diversity inclusion. We're still committed to developing leaders in the nonprofit and social sectors. We're still interested in engaging citizens in their communities as volunteers and as givers. in their communities, but we're also interested in helping sustain communities. So as we help organizations recover from the pandemic and rebuild, that's all about making them more sustainable for the future. And so that will be a priority for us in the next few years as well.

Okay, any advice for people that may be interested in reaching out to you?

Well, you've got to be— it's got to be authentic. Right. So we'd like to partner with people who have— who are authentic, who have authentic ideas, things that are, you know, make sense for them, they're relevant to them and relevant to us because we want to be authentic as well. We do like to deal with people who— in organizations that are transparent, you know, so all the cards are on the table, if you will, and our cards are on the table. And so we want to be honest and upfront with one another. And then I think that I've always liked this idea of being both focused and flexible. So, you know, be focused and disciplined, you know, with your idea, but also be flexible enough to tweak it or to change it or to— if you're in a partnership, sometimes you have to compromise and come up with a third idea or fourth idea. So it's, It's good to be focused and have that idea and have that discipline, but it's also good to change, uh, you know, and to be flexible with that idea as well. So be focused but flexible.

So you really do view it as a marriage, both the good and the bad term of marriage, by the way.

Absolutely. Absolutely. You know, I think that philanthropy and corporate social responsibility, or what is now called environmental social governance, work within companies is the way that we're going to move, you know, our countries and our planet forward. And so we're just thrilled to be engaged in that work and to be able to partner with terrific organizations and businesses along the way.

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