July 10, 2007

Second Thoughts on Fund Raising Targets

In an era when it’s just not big news when a major university lands a $50 million gift or announces a billion-dollar campaign, you might expect fund raisers to be feeling pretty good about their ability to bring in the big gifts.

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But at the annual meeting of the Council for Advancement and Support of Education, in Chicago Monday, development leaders were anything but giddy. A session on “measuring the return on investment” featured analysis of how to tell whether colleges are getting a good return (financially) on what they spend on development. But the session also featured some serious second guessing about trends in the field.

“You can raise a billion dollars at a lot of universities and make no tangible difference” in the quality of the institution, said Mark A. Petersen, associate vice president for development and alumni affairs at Southern Methodist University, to knowing nods in a packed room.

The issues Petersen and others explored focused on the unintended consequences of policies for which they saw plenty of logic: raising lots of money and trying to make rational decisions about how effective fund raising operations are. It is the combination of these issues that can create problems, speakers said.

Darrow Zeidenstein, vice president for resource development of Rice University, outlined how various metrics affect policies. For example, he said that one common measure was to look at “cost per dollar raised,” but that many now believe a better measure is “return on investment.” Cost per dollar raised tends to focus on a single year, which he said is problematic, while the return is less likely to be immediate but is still an effort to quantify the results of spending.

When fund raisers are focused on a single year, many push small annual donors to go up too much too quickly, offending them in the process. But if you are taking a multiyear approach, potential donors aren’t pushed too hard and a college avoids the potential long-term loss of a donor’s trust.

Likewise, he demonstrated analyses used by Rice to show that additional spending on fund raising would pay for itself, and then some. He cited studies showing that the universities that have the greatest fund raising success are those that spend at least $250 per alumnus on fund raising costs. Based on various comparison studies, Rice is in the process of moving its per-alumnus spending from $247 to $296 — a change that is likely to yield a return of 12 times the incremental increase.

In “the context of accountability,” Zeidenstein said, it’s only appropriate that development offices have financial models to demonstrate that increased spending will yield important results.

The problem, speakers said, is that all of these metrics are based on dollars or or other easily measurable factors — number of potential donors identified, number of visits to potential major donors and so forth. The metrics don’t reward getting the most important gifts, reaching more people, or actually improving an institution.

“We’ve created a culture of winners and losers,” said Petersen. The parts of fund raising that are easiest to quantify and that bring in the most money — major gifts and campaign priorities — end up getting lots of budget support, he said. Planned giving and annual giving are a bit behind. Donor relations and gift administration are further behind. And alumni relations and marketing are getting lost.

Alumni relations doesn’t bring in money in the short term, but builds the relationships that will yield results in the long term, he said. The question fund raisers need to ask is “what’s sustaining the pipeline?”

Matthew J. TerMolen, associate vice president of alumni relations and development at Northwestern University, said he worries about applying the same logic to divisions of a university. If he had to do so, development jobs at Northwestern’s music and journalism schools would be shifted to the business school. That won’t happen, he said, but the shift in priorities across higher education is real, and fund raising is part of it.

Several fund raisers in the audience voiced frustration with their sense that they are forced to go for short term gains at long term cost to their institutions. One talked about “drive-by solicitations” in which a major gifts official approaches people, and the minute that they indicate they aren’t willing to give, writes them off for five years. If there is too much pressure to produce dollars in the short term, there is logic to that approach. But such would-be donors, written off because they can’t produce a gift at a given moment, may be the key to a future campaign — and may be reluctant to give because of the way they were treated.

Another fund raiser in the audience talked about “gifts that give” vs. “gifts that take,” and reviewed the problems of accepting gifts that no one wants (endowments for special interests of a donor). Such gifts don’t get much attention and the donors may never give more or more appropriately.

“The whole focus becomes hitting the number,” Petersen said. He predicted that some universities have so undervalued their donors and alumni that some of the big campaigns currently going on will not meet their targets.

Zeidenstein said that all of the accountability measures focus on efficiency, and not true effectiveness — improving institutions. Too much fund raising “is just a naked chase for dollars,” he said.

In theory, the administrators who supervise fund raising department should be acting as a check on the system, several people in the audience said. But there didn’t seem to be much hope there. While those who gave presentations talked about thoughtful approaches taken on various issues, many in the audience said that college leaders are more concerned with closing a campaign than thinking about the future. So they will cut budgets for alumni affairs (or eliminate it as a separate division) to hire more major gifts officers.

“The people in administration right now really don’t seem to care,” said one person in the audience.

— Scott Jaschik

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