when the tsunami struck Asia in December 2004, Pfizer Inc. jumped into action. Within 48 hours, the pharmaceutical giant gave $10 million in cash grants to Unicef and other relief groups.

The company's biggest contribution, however, came over the next several weeks when it shipped $42 million in pharmaceuticals and sent a team of 10 specialists in water and sanitation to the disaster area.

"A cash gift can be crucial, but there are many times when the most effective form of philanthropy is to send products or people with special skills,'' says Paula Luff, senior director of philanthropy for Pfizer. "It makes sense to structure gifts so that they suit the needs of the people working on the ground.''

Giving products and services is becoming a big part of corporate philanthropy. In 2004, 92% of Pfizer's $1.2 billion in donations were in noncash gifts, as were 90% of Bristol-Myers Squibb Co.'s $601 million in assistance, according to a study conducted by The Chronicle of Philanthropy. Other big in-kind donors included Time Warner Inc. and Altria Inc.

Along with serving the needy, noncash grants offer advantages to corporations. Giving products to countries or regions in need generates good publicity, boosts employee morale and helps in recruitment. In-kind giving also carries generous tax advantages.

"If a lumber company gives money to a ballet, employees won't necessarily appreciate the gift,'' says Margaret Coady, program manager of the Committee Encouraging Corporate Philanthropy, a nonprofit group in Manhattan. "But if the company gives lumber to Habitat for Humanity, that is something that its employees understand and appreciate.''

Ms. Coady says that in-kind programs may be particularly effective at improving morale when employees participate in the effort. For example, Home Depot assists KaBoom, a nonprofit that builds playgrounds around the country. The home-improvement chain supplies materials and employee volunteers. "The employees love it,'' says Ms. Coady. "They look forward to using what they know to build a playground in their community.''

Then there is the bottom-line impact of in-kind giving. The Internal Revenue Service allows companies to deduct the retail value of any gift. So, for example, if a manufacturer donates cheese that retails for $10 to a soup kitchen, the company can deduct the full amount--even though the cheese may cost only $5 to produce.

Tax breaks

"the tax advantages of giving products are significant,'' says Brad Googins, executive director of the Center for Corporate Citizenship at Boston College.

To make their gifts more effective, corporations are often establishing long-term alliances with nonprofit groups to ensure that both their cash and noncash gifts go where they are most needed.

As part of its $150 million campaign to fight AIDS in Africa, Bristol-Myers Squibb has established a pediatric clinic in Lesotho, a country where 20,000 children have AIDS. The drugmaker works in partnership with the country's government and the Baylor College of Medicine in Houston. The government donated the land, while Bristol-Myers paid for the equipment and supplies drugs at low cost.

Free training

the drug company also asked PricewaterhouseCoopers to provide free training in basic accounting to local nonprofits in Africa. "We found small groups that understood their countries, but they didn't necessarily have the ability to manage cash donations,'' says John Damonti, president of the Bristol-Myers Squibb Foundation.

Managing in-kind giving can be particularly difficult in the midst of a disaster. Following the Pakistan earthquake of October 2005, many companies sought to deliver blankets and other supplies but were unable to move through the mountainous area.

One company that succeeded in lending a hand was IBM. The computer company has a crisis management team that is trained to reach difficult destinations quickly. The group brings laptops and assists local nonprofits in managing supplies and locating survivors.

"Companies are learning that simple cash donations will not always do the job,'' says Johanna Schneider, executive director of the Partnership for Disaster Response, which coordinates efforts by major corporations. "You need to make careful plans for responding to the chaos that always occurs during disasters.''