Habitat for Humanity International: Brand Valuation

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Habitat for Humanity International: Brand Valuation

Problem Definition: 

Habitat for Humanity International is facing challenges in regards to aligning the HFHI brand to its mission and values. As a result, HFHI struggles to measure, manage and strategically utilize the brand value for furthering its mission.

What Business is HFHI in? What is its value proposition?

Habitat for Humanity International’s mission statement is “to work in partnership with God and people everywhere, from all walks of life, to develop communities with people in need, by building and renovating houses so that there are decent houses in decent communities in which every person can experience God’s love and can live and grow into all that God intended.” However, it is important to note that, HFHI’s stated mission does not necessarily align with the value proposition (benefit minus costs) for all its stakeholders. The fact of the matter is, HFHI is in the business of building and renovating houses for those in need by acting as “ a construction company, a bank, and a human services organization all rolled into one” (pg. 4), which does not include religious proselytization. Since the religious element does not play a part in the organization’s operations and has relatively low awareness, the end result is a relatively comparable value-add among the religious and non-religious partner families, donors, and volunteer partners.

HFHI provides a house to families in need a modest home (benefit) through interest-free financing, monthly payments, and sweat equity (cost). The notion of the “partnership housing” is central, a concept which provides investors and volunteers the opportunity to both donate funds and actively work with home recipients to create housing - with the benefit of knowing that they are not giving a hand-out, but a hand up (Exhibit 1). According to Exhibit 12, this is a key aspect of the attraction of HFHI to current and prospective partners.  The family receives an opportunity to buy and finance a house they could not otherwise afford, differentiating the value of “partnership housing” from a “giveaway” which is implemented by HFHI competitors. The strength of HFHI’s value proposition is found in the powerful continued partnership between HFHI’s key stakeholders, served families and supporting donors and volunteers. This realized value has fueled the brand’s aggressive growth in reaching 3,000 communities in less than 30 years.

The value proposition of HFHI also offers a co-branding and team building activity appeal for corporate donors and other NPOs (especially churches) because of the experience HFHI provides in exchange for donated funds. First, corporate donors receive the opportunity to partner with an extremely popular brand and improve their own consumer perception (Exhibit 10). HFHI also provides a strong volunteer experience for individuals or groups, allowing corporations, churches and even universities to use their sponsorship to train participants and build organizational culture (Exhibit 10).

What are its strengths? What weaknesses do you see? What challenges are on the horizon?

Habitat for Humanity’s strengths, weaknesses, opportunities and threats are summarized with the SWOT chart in Exhibit 1.

How is it distinctive/differentiated?

Habitat has several distinctive characteristics and resources. One unique strength is the tangible result produced by their work. Each project undertaken by HFHI yields a house for a served family. Another distinctive characteristic is the experience HFHI provides for its volunteers. HFHI provides volunteers to team directly with the family being served. HFHI also provides corporations with the opportunity to not only give funds but to achieve team building and employee training through volunteering with HFHI. Another distinctive feature of HFHI is that the houses are funded through a partnership between donated funds and funds provided directly from the served family. The participation and strong support of President Jimmy Carter is a distinction that brings notoriety and recognition to HFHI. HFHI is distinctive due to its extremely positive public perception; these positive perceptions transcend geography, political party, and age. Less than 5% of the public views HFHI negatively and the in the US the organization has strong brand awareness (69% aided awareness).

What factors determine the success of HFHI?

According to the Exhibit 14 brand index chart penned by Interbrand, which assesses Habitat’s key drivers, HFHI’s brand strength depends heavily on having a “tangible result” or continuing to provide volunteers/patrons with the benefit of seeing a house constructed as a result of their donated time and resources. This is followed by allowing stakeholders to feel as if they are “part of the solution” and creating a “local impact.” As a brand, the organization will succeed if it continues to emphasize these elements of its operational model and messaging.

Do you believe the $1.8 billion valuation? Is it too high or too low? Justify your response based on an evaluation of the valuation methodology.

If non-profits are to use brand valuations to leverage the value of their brands in securing corporate partnerships, they must be able to measure their brand value with accuracy. HFHI’s $1.8 billion valuation is not believable because the valuation is lower than it should be due to Interbrand’s methodology.

Interbrand states at the onset that brand value accounts for between 30%-70% of a company's market capitalization; considering the market capitalization of a non-profit is essentially $0, their method is not an accurate tool for valuing the non-profit. They were able to direct the funds used by HFHI (total funds and raw materials applied to the organizational mission) as part of the economic earnings for measuring the brand, but it’s likely that these were only counted as fair-market value as would be used for corporate write offs negating normal profits.  An accurate brand valuation for HFHI must be capable of accounting for EVA in terms of each of these factors: revenue from services provided, donated revenue and materials, in kind donations, economic value of donations of volunteer time, in kind donations of expertise, and sweat equity of served populations.

Their valuation does not count volunteer time, goodwill or other non-financial values, which are much higher in non-profits than in for-profits.  Interbrand’s model refers to “earnings” as “discounted future cash flows,” which does not take into account the tremendous value of the volunteer labor and sweat equity given to HFHI. Interbrand attempted to replace economic earnings with “value of lives saved and/or lives improved,” but clearly “lives improved” cannot be accurately valued in economic terms.