The 2016 “AGB Board of Directors’ Statement on Institution-Foundation Partnerships” makes a compelling case for the growing importance of foundations not only as philanthropic partners of their related colleges and universities, but also as entrepreneurial partners. At Arizona State University, a leader in innovation and entrepreneurial development in higher education, a handful of people reimagined its foundation’s strategic plan and business model and in 2016 helped launch ASU Enterprise Partners as its new foundation partner.
AGB Senior Fellow Tom Hyatt recently talked with ASU Enterprise Partners’ CEO Rick Shangraw to get a closer look at the new model.
WHY A NEW MODEL?
Tom Hyatt: Until recently, your organizational model was similar to that of many institutionally related foundations across the U.S. You had the mother ship that was the traditional foundation itself, and you had some other enterprises affiliated with it. Is that a fair characterization of where you were a year ago?
Rick Shangraw: Absolutely. We looked like many institutionally related foundations, in that we had a primary mission: fundraising. But over time, a number of other initiatives crept into the foundation sphere, and we were responsible for those as well.
Hyatt: What made you rethink your structure?
Shangraw: It was clear that our donor base was confused, because they not only saw our philanthropic role, but they also saw these other activities we were undertaking. They had questions about our role and reach.
In an organizational structure where philanthropy was in the lead, the foundation had to integrate all of these diverse activities under that limited framework. It became particularly problematic in terms of governance because we were forced to have a single board that could cross the many different domains that had been thrust into the foundation. The challenge for our board chair and me was to develop a business model and a governance strategy that could accommodate multiple initiatives.
Hyatt: How did the single board model hold you back?
Shangraw: The board was responsible for a very wide range of programmatic areas but it was originally set up around the traditional foundation fundraising function. The board reflected that, and as we added on different pieces—technology transfer, real estate, specialized research programs—it became clear that the board didn’t necessarily have the desired competencies to provide insight within those areas in as effective a manner as we thought could be possible.
Hyatt: Is it fair to say that your strategic plan for the foundation was broader than your business model?
Shangraw: Yes, strategic planning was particularly challenging because we were forced to think about the foundation as a single organization with a lot of different components to it, but nevertheless integrated under one strategic plan. We really weren’t structured to operate on a multidimensional basis where we could think about strategic plans for each one of those subcomponents.
Hyatt: You’ve mentioned the need to segregate philanthropy from other foundation activities, and the challenges that donors have with that. Why couldn’t you do that through your previous model?
Shangraw: I think what we all share in higher education today is an interest in finding new revenue sources; the singleentity foundation model was built on one primary revenue driver: philanthropy. Of course, it’s been a fantastic source of revenue for our institutions, but it was also clear that as other programs and initiatives were added to the foundation’s mission, there was an expectation that there would be revenue raising from those sectors, as well. We needed to move from a fundraising model to a resource-raising model.
Hyatt: Let’s walk through the new structure. ASU Foundation is no longer the institutionally related entity. What’s changed?
Shangraw: We took the ASU Foundation and we extracted from it everything that wasn’t philanthropy-oriented. We made the foundation “pure” again. And it is now solely a philanthropic organization.
That resulted in the creation of a parent organization with the foundation and four other affiliated entities. We have University Realty, which is a real estate investment entity; Arizona Technology Enterprises, which is a tech transfer entity; ASU Research Enterprise, which is a specialized technology research firm; and the Research Collaboratory at ASU, which undertakes international research projects. Each of the current affiliated entities is a nonprofit.
They all fall under a parent organization that’s called Enterprise Partners. At the Enterprise Partners level, we have a shared service model, where all of the services that were previously undertaken individually by these other entities or their predecessors are now consolidated within the parent organization and shared back with these five subsidiary organizations.
Our framework also allows us to add in a new affiliated organization. It would immediately have access to these shared services, which is always one of the biggest challenges. A new subsidiary can have a financial team, the IT team, the general counsel team, the communications team, and the HR team from day one. It also allows everybody to share employee benefit pools.
BIG THINGS ARE HAPPENING
Hyatt: This is an exciting time to be a foundation chief executive officer at Arizona State University. What’s happening now at the university and the foundation that’s keeping you energized and engaged?
Shangraw: You’re exactly right—it is a fun time to be at ASU. First of all, we’re launching our first comprehensive fundraising campaign in 14 years. As you know, that’s a long time to go between campaigns, but we have finally gotten to a place where we’ve been able to demonstrate some of the proof points of what we’re trying to do at ASU, so the time has come to launch a campaign.
The thing that’s been most rewarding for me has been demonstrating the coexistence of being an accessible university and one that also strives for excellence. We’re also working hard to keep our designation as the country’s most innovative university, and that requires a lot of hard work.
Another thing that’s really exciting for higher education in general is that we’re spending a lot of time thinking about how we integrate digital options, for both our on-campus students and our students who are online. That’s growing very rapidly and has many pieces and components to it.
Hyatt: Is your outreach different as a foundation with online students and online alumni?
Shangraw: Yes. The big thing that we’re thinking about is how to engage a student who’s never stepped foot on a physical campus. How do you maintain that engagement over long periods of time? We’re thinking about creative programs, including pop-up engagement opportunities in cities where there is a density of students who participated exclusively in ASU’s online program. We’re thinking about digital collaborative platforms to allow our students to stay connected with each other. In the end, it’s a new model for us to have such a large share of alumni who have never been on our physical campuses, though they quickly increase our alumni footprint across the globe.
FOUNDATION INNOVATION
Hyatt: Innovation has been the hallmark of President Michael Crow’s leadership in his time at ASU, and clearly that extends to the foundation, as well. What does innovation mean to you in the foundation world?
Shangraw: At the university level, I think the most important thing about innovation is that it’s pervasive; it’s not only a creative degreed-program or an innovative research project. It’s something that affects all faculty, all staff, all students, all alumni, all community members.
This thinking extends to the foundation. Something that differentiates us in the innovation field is that we’ve created an environment where you can fail and then try again. Now, of course, we don’t like to fail very often, but nevertheless there is that opportunity to try new things and, if they don’t work, then we adjust and we try something else. I think the ability to pilot and test new initiatives at the foundation in a community, an ecosystem that’s receptive to innovation, has really been helpful to us.
Hyatt: Research is a hallmark of much of what you are doing at ASU. Is support for that function any different under the new structure?
Shangraw: The new structure frees us to do research in ways that allow us to serve as a good partner to the university. For example, one of the research organizations is focused almost exclusively on classified defense research; while that could be done directly by the university, it can be undertaken with more flexibility outside, in a collaborative model. The Research Collaboratory was a chance for us to work on highly specialized projects that require either broad international collaboration or corporate collaboration that wasn’t easy to do inside of the institution.
Hyatt: The foundation, then, has gone back to its roots. Is it first among equals?
Shangraw: It is exclusively focused on philanthropy. And at first there was a concern that the foundation would become secondary to this parent organization, and many of the worries raised by my team were around that issue.
We worked hard to mitigate that disquiet. However, it was a much greater matter that the foundation was doing so many different things and it was so diverse and not as focused. Purifying the foundation and doing exclusively the mission-critical philanthropy work there overcame a lot of those concerns.
A CHANGING RELATIONSHIP
Hyatt: What is the relationship, then, between this family of organizations and the university?
Shangraw: It is really interesting. The primary relationship is now between the university and Enterprise Partners. That’s where our legal agreements exist. That’s where the service agreements exist. However, in the case of some of our service agreements, they flow down into the various sub-entities with Enterprise Partners, so there is direct cooperation and a relationship between those suborganizationsand the university.
For example, Arizona Technology Enterprises, which is the university’s technology transfer agent, works in collaboration with the university’s research office, and many of the services are provided directly to that research office. So there’s a deep university relationship at the Enterprise Partners level, but there also continues to be a focused and collaborative relationship at the subsidiary level.
Hyatt: Once the foundation board dives in and thinks this new model through, it immediately becomes apparent to directors that this is going to have substantial impact on who sits where. What do I do now? What committees am I on? How did you start to address those concerns?
Shangraw: It came in two stages. There was the initial stage where people began to wonder, is it more important for me to be on the parent, or is it more important for me to be on one of the subsidiary boards? And so we had discussions with board members to determine where their passions lie and what projects most appeal to them. We also tried to determine where they thought they could make the best contribution.
We also took it slowly. We’ve kept the board of Enterprise Partners and the board of the foundation identical through this first year, so they are not jockeying for position, and it gave people a chance to become familiar with the organization.
The second stage of the process, which is occurring now, is that people are recognizing what it means to have a parent organization, with five different subsidiary organizations. They’re beginning to realize that maybe they don’t want to be on multiple boards, and maybe they don’t have the time or the interest to contribute to multiple boards. I think the reality is setting in now about how the system is operating.
Hyatt: What does the rollout look like so far?
Shangraw: It’s certainly going to roll out over a period of time. This is not something where you turn the switch and everything is at full speed. There is going to be continued work on board composition. There is going to be continued work on understanding the financial model, of getting the allocations set up between the parent entity and the subsidiaries. There will be a lot of effort to make sure that we keep a tight relationship with the university. It will likely be a good 12 to 24 months before many of those things take shape. All in all, the rollout has gone well so far.
Hyatt: One of the interesting governance features of this model is that you will be sharing some committees between organizations, notably the investment and audit committees. How does that work?
Shangraw: Something we recognized early on was that all of the entities have investment options and all of the entities have a need for audit. And so, it didn’t make a whole lot of sense to us that we would create separate investment committees and audit committees for each organization for those various functions. Accordingly, we housed the investment and audit committees at the Enterprise Partners parent level; it provides audit and investment committee governance services to each one of the subsidiary organizations.
Hyatt: Does President Crow’s relationship with the foundation change as a result of this innovation?
Shangraw: I think it has focused his relationship with the foundation because now he knows that if he’s with the foundation, he’s working on philanthropy, but if he is with University Realty, for example, he’s talking about real estate resources. That has been helpful in many respects.
I also think it has expanded his ability to affiliate or partner with other entities that may not fit into the university. Our shared perspective is that if an activity can fit within the university, then that’s where we are going to put it. But when an activity can’t fit there, or there are reasons why it would more effectively fit elsewhere, the president now has a new framework under which other options are available.
Hyatt: So in the past, where he might have come to you solely as president of the foundation, he can now work with you as CEO of Enterprise Partners?
Shangraw: That is correct. My role has really become one of helping him think through these partnering relationships or of new entity-forming relationships. Before, he really didn’t have a partner in the university to strategize on these issues because the foundation was focused on fundraising. Now, he has another place he can go to talk about these broader relationships.
MEASURING SUCCESS
Hyatt: Let’s wrap up by thinking about your measures of success for this new resource-raising model. How will you know if this is working?
Shangraw: We measure success along several dimensions. First and foremost, I am very hopeful that this innovation will bring more resources to the university. In particular, one of the biggest challenges that any university president has today is that most foundation resources are restricted. This new Enterprise Partners model should spin off a considerable sum of unrestricted resources that are very valuable to the university.
Another measure of success will be to see us increase partnering and engagement by bringing new entities to the university that can affiliate more usefully and broaden our scope and capabilities.
We will also measure success through the continued close collaboration between the university and Enterprise Partners and its subsidiary organizations. My hope and belief is that the Enterprise Partners model will go further and will improve and evolve those relationships.
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