Partners in Advancement

By David Bass    //    Volume 24,  Number 5   //    September/October 2016

For public institutions, the roles played by affiliated foundations and the ways institutions and foundations work together are evolving. In August, AGB’s Board of Directors endorsed a “Statement on Institution-Foundation Partnerships” describing some of the factors shaping these important relationships, identifying challenges stemming from their changing dynamics, and recommending principles and practices to foster enhanced alignment and collaboration between institutions and their affiliated foundations. This article will explore ways public institutions are putting some of the principles articulated in the statement into practice by more closely integrating foundations into their advancement programs.

Growing Support for Operations and Excellence

The business model of higher education is changing, with state funding accounting for an ever-diminishing proportion of public institutions’ budgets. Escalating tuition rates and student debt have led some policymakers, pundits, and prospective students to question the return on both private and public investments in higher education. Public-private partnerships have become an imperative for institutions challenged to operate more entrepreneurially.

At the same time, campus cultures are undergoing change, as student and alumni populations become increasingly diverse and exhibit a level of activism not seen since the 1960s. In such a climate, advancement functions—encompassing fundraising, alumni relations, and marketing-communications—have become ever more central to maintaining institutional excellence and, in some cases, long-term financial sustainability for public colleges and universities.

It’s not news that many institutions are looking to their affiliated foundations to provide more private support. State support for public higher education has, with ups and downs, been in decline since 1980. During the same period, the fundraising capacity of public institutions has grown consistently. In 2000, public institutions participating in the Voluntary Support of Education survey (VSE), sponsored by the Council for Aid to Education, reported $8.3 billion in gifts and grants (43 percent of the total reported support). By 2015, giving to higher education had grown by 70 percent, with public institutions receiving over $15 billion of the total $33 billion reported.

In concert with the growth in fundraising, endowments have become an increasingly important component of public institution budgets, accounting for an average of 6.1 percent of operating funds in 2015, according to the NACUBO-Commonfund Study of Endowments. For a handful of research institutions with mature development programs, the “margin of excellence” funded by private resources (gifts, grants, and endowment distributions) has outstripped the proportion of operating budgets funded by the state. For these and other institutions, private resources confer crucial competitive advantages in the form of scholarships, endowed chairs, and transformative programs and infrastructure. While gifts, grants, and endowments will not fill the budgetary gaps created by declines in state support in the foreseeable future, building fundraising capacity is a central strategic imperative for presidents, provosts, deans, and foundation boards.

Integrating Advancement Functions

Not surprisingly, many public institutions are assessing, and in some cases adapting, the structure of their development programs to enhance efficiency and better integrate and align advancement functions in support of their institutions’ strategic priorities. Historically, many public universities have had highly decentralized advancement structures. An affiliated foundation, either independently staffed or operated by institution employees, might be responsible for planned and major gift programs and campaign leadership. A separate alumni association might organize engagement and networking activities for alumni, publish a magazine, and conduct revenue-generating activities such as travel programs. Separate athletic or medical foundations might also be involved in fundraising, and the central administration might oversee external relations, communications, and marketing.

Coordination can be challenging in such cases, creating inefficiencies, diluting or confusing institutional branding and communications, and undermining effective cultivation and stewardship of major gift prospects. It’s not unusual to hear chagrined development professionals tell stories about donors of seven-figure gifts who subsequently received calls from the annual fund or appeals for alumni membership dues; others describe cases in which an enterprising faculty member makes a $10,000 ask of a company or foundation the administration is targeting with a multimillion- dollar proposal. Beyond concerns about efficiency and coordination of prospect management, shifting donor interests are driving changes in development.

Major or principal gifts account for a growing proportion of all dollars raised by colleges and universities. The rule used to be that 10 percent of the donors contributed 90 percent of the dollars. Many professionals now suggest that 5 percent of donors account for 95 percent of all funds raised. Rather than giving out of love for alma mater, major donors look to institutions as partners that can help them address significant social challenges. To engage such prospects, chief advancement officers and presidents need to work with academic leaders from across the institution, and, in some cases, forge external partnerships, to come up with visionary proposals that can have a transformational effect on the institution while advancing the philanthropic vision of their entrepreneurial donors. Siloed development structures, focused narrowly on the priorities of individual units or schools, may not yield the big ideas needed to galvanize the interest of donors for whom philanthropy is a form of impact investing.

Efforts to integrate and align advancement functions need not entail centralizing them under university administration. More than half of the respondents (54 percent) to a 2014 AGB Quick Governance Survey on the changing role of foundations reported that their foundations had become more active in fundraising within the previous five years, and more than one-quarter (27 percent) reported that responsibility for some development functions had been transferred from the institution to the foundation. Recruiting and retaining top development talent poses serious challenges for many institutions, and affiliated foundations may be able to offer more-competitive salaries and benefits, be more nimble in hiring, and have greater flexibility in staff management than would be possible under state administrations. Development programs yield an enormous return on each dollar spent but require consistent and growing investment to maximize that return. While few foundations have the capacity to fully fund development programs, institutions may find it beneficial to segregate fundraising and campaign expenses from general operational and instructional budgets.

Perhaps most importantly, fundraising and stewardship benefit greatly from dedicated, high-level volunteer leadership. While appointed or elected campus governing boards may have little affinity for philanthropy and scant time to devote to oversight of advancement programs, foundation boards can be recruited specifically for their experience and interest in fundraising, capacity to give, and stature and relationships with other potential supporters. In recent years, Ball State University, Portland State University, the University of Cincinnati, the University of New Mexico, Purdue University, the University of Toledo, and the University of Vermont have transferred development operations from campus to foundation administration. (See box below for more about the University of Vermont.)

University of Vermont Foundation

In 2011, the University of Vermont (UVM) Foundation was incorporated to provide leadership for a more effective major gift fundraising program and future campaigns. The foundation created a board of directors not to exceed 29 members with clear expectations for annual and major giving. To ensure strategic alignment with the institution, the bylaws designate the chair of the institution’s board of trustees and the institution’s president as ex-officio members and stipulate that the foundation board appoint two additional members of the institution’s governing board as members of the foundation board. Recognizing that engaging a large cadre of volunteers is vital to building fundraising capacity and to creating a pipeline of prospective directors, the foundation also created a leadership council consisting of approximately 100 university donors appointed by the board of directors. All directors must first serve on the leadership council, helping to ensure that new appointees are already familiar with institutional priorities and have demonstrated a capacity for and commitment to the work of the board. Criteria for election to the council are determined by the board (including a lifetime giving requirement of at least $100,000), and council members may be invited to participate in the activities of the board and/or the foundation on an advisory basis. Under the new model, development staff, including the foundation president and chief executive, are employees of the foundation, which receives funding from the institution for its services.

In FY11, before the foundation’s launch, total gift commitments to the institution were $20.2 million. In FY12, commitments jumped 122 percent, to $45 million, and have grown by more than 10 percent each year since. At the end of the third quarter of FY16, total commitments had reached $76.7 million.

The foundation board has also strengthened development operations. Its focus on achievement and accountability has raised the professionalism of all aspects of the organization. Understanding that key investments are necessary to continue delivering on the promise of a high-quality advancement operation, the board has supported management investments in everything from upgraded office facilities and enhanced stewardship programs to fundamental IT infrastructure and employee wellness programs.

The Alumni Connection

Public institution and foundation leaders are also adapting administrative and governance structures so that alumni relations functions are more closely integrated and aligned with fundraising. While fundraising is becoming increasingly vital to public institutions, engaging alumni—who have historically accounted for the lion’s share of private giving to colleges and universities— is becoming more challenging. The growing diversity of recent generations of alumni, the ubiquity of social media, the increasingly transactional relationships many students have with their institution(s), and mounting student debt levels have all likely contributed to declines in alumni giving. Between 2000 and 2015, according to the VSE, the percentage of solicited alumni (from all types of postsecondary institutions) who made contributions to their alma mater declined from 18.3 to 11 percent. VSE data from the past decade show that the average number of alumni of record has grown by 44 percent, but average alumni participation rates have declined from 11.5 percent to 6.7 percent (alumni participation is the percentage of alumni of record who make contributions, as opposed to the percentage of solicited alumni who give). In a 2015 publication, “The Strategic Alumni Relations Enterprise,” the Education Advisory Board (EAB) stated the case starkly, arguing that “alumni populations are growing, donor counts are dropping, and alumni are increasingly unresponsive to their alma mater’s traditional engagement efforts.” This isn’t surprising in a period in which young alumni stay continuously connected with classmates and cultivate social and professional networks on social media.

While fundraising has become increasingly data-driven, informed by sophisticated prospect research, analytics, and performance metrics, many alumni relations programs lack clearly defined and quantifiable objectives. Administrators may find it difficult to justify financial support for alumni programs focusing on face-to-face “friend-raising” events that might touch a few hundred or thousand graduates but yield no clear benefits to the institution when annual giving, major gifts, and planned giving programs have quantified returns on investment. Rather than write off alumni relations, however, forward-thinking institutions are looking for ways to refocus alumni operations so that they advance fundraising. Some institutions have eliminated membership dues, delegating annual fund solicitations to the alumni association. EAB’s report describes the ways institutions are positioning alumni relations so that programs and engagement efforts advance specific goals aligned with institutional priorities in enrollment, student career development, branding, development prospecting, and donor stewardship.

At public institutions, the repositioning of alumni relations increasingly entails restructuring the relationship between alumni associations and foundations. In a 2015 AGB Quick Governance Survey on institutionally affiliated foundations and alumni associations, 75 percent of foundation chief executives reported that foundation staff and alumni association staff have begun to collaborate more closely, and an additional 18 percent indicated that they would like to make changes to enhance alignment and collaboration between the foundation and alumni association. More significantly, 20 percent reported that governance structures have been or are being adapted so that the foundation has more authority and oversight over the alumni association. An additional 16 percent were interested in making such changes in the future.

In 2014, the University of Wisconsin Foundation announced a merger with the university’s alumni association to enhance efficiency, align communications, and capitalize on synergies between alumni engagement and fundraising. In 2015, the University of Connecticut’s (UConn) board of trustees endorsed a plan withdrawing funding from the alumni association and aligning all of UConn’s institutional advancement operations, including alumni relations, under the direction of the UConn Foundation. Campus and foundation leaders at numerous other institutions, including the University of Rhode Island, the University of North Dakota, and the University of Cincinnati, have taken steps to integrate alumni associations and foundations or to reposition alumni relations functions under the oversight of the foundation. There are differences of opinion among alumni relations professionals and foundation leaders about the value of outright mergers. Much depends on individual institutional contexts, but there’s little doubt that, going forward, foundations and alumni associations will need to work much more closely to align objectives and strategy.

Volunteerism and Philanthropy

Recognizing the strong correlation between volunteerism and philanthropy, both public and private institutions are exploring ways to more effectively identify, engage, and cultivate volunteer leaders to support institutional advancement efforts. In some cases, foundation boards are taking the lead on such efforts, adapting board size and structure, revising expectations for board service and philanthropy, developing new board composition matrices, and changing committee structures with the objective of building the strongest possible fundraising leadership board. In July of this year, Arizona State University inaugurated an innovative new governance model in which five affiliated organizations—including entities responsible for fundraising, technology transfer, real estate, private partnerships, and research—are united under a single governing board. The restructuring of the UC Davis Foundation’s board to encompass a smaller fiduciary board along with a much larger, more inclusive leadership body is another example of the ways foundations are adapting their governance structures. (See box below for more about UC Davis.)

UC Davis Foundation

In May 2014, The University of California (UC) Davis wrapped up its first comprehensive campaign, raising more than $1.13 billion from nearly 110,000 donors. The UC Davis Foundation subsequently partnered with AGB Consulting to conduct an assessment of its current organizational structure so that it could optimally support and drive the next campaign. The process included a board self-study and an analysis of peer institutions that suggested the campaign would require a much larger, more geographically diverse network of volunteer leaders and a broader spectrum of opportunities for engagement across the institution.

Over the next year, a board task force built consensus for a modification in board size and structure, identifying needed changes to foundation bylaws and governance practices, and developing a plan to better integrate and align the work of the foundation board with the university’s academic enterprise and strategic priorities.

The foundation is now led by a group of 11 to 19 executive trustees with fiduciary responsibility (reduced from an unwieldy 43) recruited from a larger group of up to 70 trustees and advisers who serve alongside executive trustees on board committees, including audit, nominating and governance, finance and investment, stewardship, and a global campaign leadership council that has replaced the former development committee. The board implemented new expectations for giving and created advisory groups charged with supporting fundraising for schools, colleges, and units within the university. Taken together, the executive trustees, trustees and advisers, and members of campus boards and advisory groups will account for several hundred volunteers who will be mobilized as philanthropic leaders in the new campaign.

As these examples suggest, there is no single optimal model for institution-foundation partnerships. Differing institutional needs, cultures, and contexts will inform individual institution-foundation relationships. Ultimately, staff and volunteer leaders must cultivate habits of collaboration and recognize that navigating the changing higher education landscape will require commitment to shared purpose, alignment of priorities, and clarity and consensus about roles and responsibilities. The alignment of advancement functions and the expansion and leveraging of larger circles of volunteer leadership enhance fundraising capacity. Ultimately, though, ensuring that the work and focus of the foundation board are closely aligned with the strategic priorities of the institution’s board and president is the most critical factor in effective partnerships.

Working with Multiple Boards

At William & Mary, we began convening the alumni association board, the governing board, and the foundation board in joint session to discuss the institutional issues of greatest importance, build relationships among these disparate board members, and discuss broad strategic objectives. This practice curtailed the estrangement that once existed between our governing board and the other two boards. For example, the alumni association had in the past resisted involvement in fundraising, an essential function for all leadership boards these days. The governing board did not fully grasp the high-value work of the alumni association to strengthen alumni relationships or the work of the foundation board to attract necessary resources. Bringing the boards together created a common understanding and engagement that quickly paid dividends. From discussions with other governing board chairs, I have learned that coordination of the leadership boards is an often-overlooked priority that is required to ensure that these leaders are all pulling in the same direction.

—Jeffery B. Trammell, excerpted from Effective Board Chairs: A Guide for University and College Chairs (AGB Press, 2016)