Case study: Thankyou Payroll – starting, testing, evolving
Thankyou Payroll has been actively using a portion of its profits for good since 2011, via its charitable arm, Generous Ventures. While the mechanism hasn’t always been impactful, Lani Evans, former CEO of Thankyou Payroll and current board member of Generous Ventures, says the business has never been afraid to learn and evolve. And it’s just embarked on its latest – and most groundbreaking – evolution yet.
“Businesses cannot exist without the communities in which they operate, and there are opportunities to include, support and celebrate communities in the work that we're doing.”
Many small and medium-sized businesses may think corporate giving is for the big guns. Thankyou Payroll and Lani Evans would like to argue otherwise, even though it’s taken the company a good 12 years to – Lani hopes – get its philanthropic model right.
With a long career in the for-purpose sector, Lani is the recently appointed inaugural director of the Aotearoa Foundation, having stepped down as the head of Te Rourou One Aotearoa Foundation. So, she’s no stranger to various philanthropic models and she’s not afraid to change things up. To that end, payroll software provider Thankyou Payroll has just begun its third and most revolutionary evolution. But getting to that point has been a process…
“If I was to describe our early philanthropy in a few words, they would be ‘well-meaning’, ‘complex’ and ‘ineffective’,” says Lani. “The lesson here you don’t always get things right at the start. Back in 2011, in our first iteration of giving, we took a small amount from every client payment and donated it to charity. There’s nothing radical about that, but we decided we’d allow every single client to tell us which charity they wanted the money to go to. The administrative load of that was significant – every client chose a different charity, and some had been deregistered or never existed in the first place, even if people thought they did.
“It was also complex for our customers, who found it difficult to decide who, amongst New Zealand’s 28,000 registered charities, to give to. And the charities themselves ended up with tiny bits of money that had no substantive impact on what they were doing. So, that iteration had a high administrative load, overwhelmed our customers, and failed to generate value for charities. We needed to do a reset.”
In 2014, Thankyou Payroll set up the Thankyou Charitable Trust, now called Generous Ventures. A staff member was appointed to run it, a board was formed, and a charitable strategy was developed.
“Our giving was not tied to the purpose of the company, rather it was tied to our people. The board of the charity included members of the Thankyou Payroll board, staff, investors, and clients. We made sure that everyone involved in the business was involved in our foundation as well, through volunteering, governance, or storytelling, and that the two entities were very closely related. The staff, board and investors knew exactly what the foundation was doing – they understood it and felt a huge amount of pride in that work”
And Thankyou Payroll’s customers? They loved it, too.
“The business experienced organic growth of more than 400% year-on-year during this time period. We could attribute that to three things – a great product, great staff, and amazing generosity. People liked us because of our ethos. Payroll is not sexy, but it’s incredibly important. We provided our customers with a great product, but our real point of difference was our staff members. They were incredibly passionate, and whenever they talked to customers, they would tell these warm, authentic stories about the purpose of the business. It felt amazing, everyone really loved it.”
But, over time, board members changed, the strategies of the business and foundation changed, the leadership changed, and the connections weakened between the business and the charity. “The business and the charity were still doing exemplary work, but they were no longer doing it together. A reset was required,” Lani says.
Many metamorphoses emerged from the COVID-19 lockdowns, and Thankyou Payroll’s latest charitable endeavour was among them – although it took quite some time to emerge.
“During the lockdowns in 2020, the wonderful Melissa Clark Reynolds took our board and our leadership team through a strategy reset, and we landed on a new organisational purpose: Thankyou Payroll’s mission is to be the leading experts on payroll, purpose driven-business and business-based generosity. That opened the door to our third philanthropic evolution…
“We decided that Thankyou Payroll should become entirely community owned.”
Community-owned companies do exist in the world – companies that use their profits for good, rather than pay them out as dividends to shareholders. For example, the founder of outdoor wear company Patagonia donated 100% of shares to a charitable organisation that's working to fight the climate crisis.
Thankyou Payroll’s model is different. The business is becoming a community-owned organisation through a shareholder exit, using profits and a bank loan to buy back 100% of its equity from almost 200 shareholders, then donating those shares to its charitable trust. It’s the first time this has ever happened in Aotearoa New Zealand, and because of that, Lani admits it’s taken a lot of background “wrangling” – but it’s all worthwhile.
“This is a win-win-win scenario, for shareholders, for the business and for the community. Thankyou Payroll’s investors will realise a profit on their investment, making money and contributing to broader social outcomes. The business will continue to meet its strategic goals, serving its customers, leaning into its payroll expertise and demonstrating what’s possible – showing there are alternatives to IPOs and traditional exits for founders and investors.”
And thirdly, the community benefits from the development of a community-owned asset that will continue to grow over time. Lani says by the time the exit is complete, the trust will be receiving around $2 million each year. “That's 10 times more than the trust was getting as a donation from the business in the former structure, so it's a big benefit, a big boost.”
And the more the trust grows, the more community impact it can have. “To me, this is the ultimate expression of corporate philanthropy: business success should lead to community success. Businesses cannot exist without the communities in which they operate, and we could be more generous with the way that we include communities in the work that we're doing.
“I'm aware that not everyone will be able to exit their business via shareholder buy out. I understand that's not always a possibility and not always desirable. But I’d like businesses to consider if they could become even partly charitably owned.”
Lani’s top three tips for running a philanthropic business:
Keep the relationship strong – Thankyou Payroll’s impact was most effective the business and the charity were tightly woven together.
Don’t be afraid to radically reset – Thankyou Payroll moved from “complex mediocrity at the very start to more effective, strategic and radical iterations”, but the business, board and staff had to learn how to do that together. “It’s okay to start where you are and learn as you go. The important thing is to be reflective, curious and open to evolution.”
Don’t forget investors – Lani says there’s a lot of talk in philanthropy about engaging with boards, executive teams and staff, but not enough about engaging investors. But that’s a big, diverse group of people with a huge amount of resources. “If you can get your investors on board with the kaupapa of your foundation, there’s a real opportunity to be transformative.”