Monday, February 16, 2009

A Long Look at Philanthropy (Part III)

Following on my previous two blog posts, I want to continue to make the case that the assiduous, sustained building of donor relationships is the most productive path to significant philanthropic results. I began this series of blogs (A Long Look at Philanthropy) by using higher education philanthropy as a case in point. I asserted that colleges and universities must have a structured, diligent and creative approach to developing relationships over a 50-year span, extending from the time new students set foot on campus until they have reached their late sixties and have made irrevocable estate commitments (the relationship, and the obligations that go with them, don’t end at that point but, if managed well over that time, they should be at a very secure and profoundly productive stage). In my first blog in this series, I argued that the most important period in that 50-year span was the undergraduate years. In the second of the series, I said the next most important period was the first five years after graduation. In this post, I will make the case for the 15-year mark as the third most important phase.

Research shows when donors give to their alma mater for the 15th straight year, the likelihood of their leaving a significant portion of their estate to that school increases by 80 percent. The amounts of their annual gifts matter much less than the persistence of their giving over that period. Indeed, those who give most generously of their estates tend to give more modestly during their lifetimes. They often lead more modest lifestyles, save at a higher rate, and leave more to others when they die. And, yet, many of their alma maters give them short shrift. Why?

The plain and simple truth is that most of us are too short-term in our thinking and our approaches. That we focus most of our efforts on securing large gifts is understandable, given limited resources, but not if it is at the expense of a far greater long-term return.

Reasons for this short-term focus include:

1. Institutions have immediate needs and fast-breaking opportunities
2. We are recognized and rewarded more for what we do now that what we make possible in the distant future.
3. We tend to believe that “a bird in the hand is worth two in the bush.”

But, if we are to inspire the philanthropy of current students, we must show them that they are the recipients of gifts from previous generations and ask, therefore, that they begin to think what they will pass on to future generations. By the same token, the leaders of institutions of higher learning must think of what they have inherited from previous generations and obligate themselves to giving to future generations. That will often entail initiating efforts that will not bear fruit during their tenures or even their lifetimes. If we invest in strengthening relationships with undergraduates or recent graduates, the real results will not be felt until 40 or 50 years later. But we owe that future investment to those whose made long-term investments in the past; we can do no less for future generations than was done for us. If we are wise and disciplined, we will do even more. We should, as the African proverb suggests, “plant trees under whose shade we do not expect to sit.”

To be more explicit and practical, philanthropy-seeking institutions need to place the greatest emphasis on donor retention. Donor acquisition is also of great importance but, as Penelope Burk has shown, many institutions make the mistake of trying to acquire more donors than they can adequately manage resulting in a loss of loyal, and potentially-loyal donors. We must do well by the donors we have before seeking more and the most fragile of those will be those that gave for the first time the year before. Donor retention strategies, therefore, should be particularly focused on the second annual gift, then the fifth annual gift, then the 10th, then the 15th. Universities tend to focus more on the “harvest” reunions such as the 25th and 50th, and too little on the earlier formative years.

And donor retention strategies should be much, much more than reminders and encouragements from the annual fund. They should be designed to listen to donors (telefund callers who solicit funds can just as readily solicit advise and opinions) and to engage them along the lines of their interests. Most of the messages to them and interactions with them should not be about fund raising. Engagement strategies should match the needs and interests of various age groups – career networking and counseling for young alumni, family activities for those with young children, “rethinking the curriculum” exercises for those who have been out for awhile or those who hire a large number of graduates.

This past December, Georgetown University received its largest gift ever as the economy was undergoing its worst contraction in 75 years. It came from someone who gave over a 54-year span. His first gift was $5. His largest annual gift was $1,000. His largest special gift was $100,000. He left $75 million to Georgetown. Just a few months earlier, it would have been worth $100 million or more. His name was Robert McDevitt. He lived a modest life and left $250 million to various universities, colleges and charities.

I must ask myself what I and my operation are doing today to recognize and develop the next Robert McDevitts. I must pay more attention to those modest but persistent donors. I must find better ways to reinforce their loyalty, to sustain their support, to balance our short-term and long-term efforts. If my team and I do our job, we will leave more loyal, appreciated donors to my successor than we inherited. We will have helped build a stronger sense of community and a deeper commitment to cause. Somewhere way down the road, Georgetown may receive another very large gift at another critical time in its history. If we’re still around when that gift comes in, my colleagues and I will have the comfort of knowing that we did our part in our time. If we are not, we will have left with satisfaction of knowing that we did not just take from those that came before. We will know that we tried to do our jobs in the right way for the right reasons; we will know that we tried to give at least as much as we received. We will have known that our efforts made a difference – even if we never knew when.

Sunday, February 8, 2009

A Long Look at Philanthropy (Part II)

In my last blog post, I expressed concern that philanthropy-seeking organizations, by placing too much emphasis on short-term results, may be undermining their greater long-term potential if not damaging philanthropy itself. I turned to higher education as a case in point, arguing that the most successful colleges and universities will be those that nurture philanthropic interaction as soon as new students set foot on campus and continue to sustain that interaction for the next 50 years. I argued that the failure to see the process in anything less than 50-year terms would consign colleges and universities to the expense of remedial relationship building. I said the most important period in that 50-year span were the undergraduate years and offered suggestions as to how colleges and universities could make better use of that formative period. Now, let’s turn to the second most important phase – the first five years after graduation.

Why do I say this phase is second in importance to only the undergraduate years? Because it is a period in which life-long patterns begin to form. If we successfully engage recent graduates as donors or volunteers, approximately 80 percent will persist in those patterns for the rest of their lives. We may have to spend a dollar to raise a dollar in that time but, to my central thesis, the long-term return will be quite significant. If we fail to engage a significant portion of this highly-mobile population, we will have to expend more time, effort and money to engage them down the road with a lower probability of success.

The best way to engage and deepen connections with young alumni is to help build their careers. Obviously, a strong career planning and placement office on campus is of immense importance but it can be made even more effective if it draws on employer-student relations developed with a broad, rich internship program (or co-op program) and if the whole is nested within a well-developed alumni network. As the world changes, it is important for advancement operations to monitor the migration of young graduates to determine where the majority are going to make their names and to have services there waiting for them. If 75 percent of their recently-graduated alumni are relocating to five major cities, then 75 percent of their services should be dedicated to those areas. The more that can be done to help recent graduates get their career legs under them, the more it will redound to the long-term benefit of the institution.

Anything that can be done in the name of career mentoring and networking will be of value but there is no substitute for a permanent presence in key geographical areas. Mature and successful alumni must be organized and chartered to create career-oriented alliances. Georgetown University has the Wall Street Alliance in New York City and its equivalent, the City Alliance, in London. It also has the Bay Area Alliance for those in high-tech careers in the San Francisco area, the Entertainment and Media Alliance in Los Angeles, and the Latin American Alliance in Miami. To be successful, these alliances must be largely self-reliant and require little assistance from the campus. Graduating students must know of these alliances and let the campus know they are moving into a target area so they can be told how to avail themselves of local services.

Yes, alumni chapters and clubs remain a very important element in keeping young alumni involved. In my experience, most alumni chapters are the province of young graduates and allow them to socialize, network and attend game-watching parties. But alumni chapters need to serve a broad, diverse constituency. Career alliances should complement alumni chapter activities but allow alumni to network in and around the dominant industry in a particular city.

In these extraordinarily difficult times, colleges and universities need to do the very best they can to reach out to young alumni who are having trouble finding jobs. At the end of the day, there may be too many young people in the market and too few jobs to go around. But these institutions must try; they must offer career planning sessions and opportunities to meet successful alumni who will serve as mentors. Even if they can only commiserate, young alums will not feel abandoned upon graduation.

Another way that institutions of higher learning can foster long-term alumni affiliation is to address to the issue of financial aid debt. The onus of that debt is the very reason that many young alumni don’t contribute to their alma mater. They pay of their bills first and then they give back but retiring financial aid debt can take a decade or more. While there may be no easy answers on how to do this, students and young alumni will give their college or university credit for trying, for making the case to donors about better financial packets that require low or no loans, for creating public service scholarships that forgive the debts of students or young alumni who seek to help the disadvantaged, and for being impassioned advocates for federal grants and low-cost loans.

Since this population is so mobile, institutions of higher learning must provide incentives for young alumni to keep in touch. After career advice and networking, young alums are most interested in the whereabouts of their classmates. Most seem to stay in touch with each other through virtual networks but it is still wise for colleges and universities to promote the submission of class notes and to provide ways for alumni to connect with each other on-line through virtual yearbooks or other systems.

To get young alumni to give merely by asking them repeatedly is the worst of all strategies. Fund raising is a legitimate way of building alumni engagement but it cannot be a stand alone activity. If it is, resentment will build and many potential donors will fall away because of what they see as the incessant drum-beating of a tin-eared alma mater.

Fund raising appeals to young alumni should focus on securing modest gifts but that doesn’t mean that the emphasis should be on the percentage of participation for its own sake. A strong, specific case needs to be made to young alumni so that they can understand how a small gift can make an impact, as would be the case with financial aid.

In my next blog, I will speak to the third most important part of the 50-year span, the 15-year milestone, a very powerful predictor of significant future support.

Sunday, February 1, 2009

A Long Look at Philanthropy (Part I)

I read recently about a successful Swedish bank that, unlike many of its competitors, had not gotten caught up in the mortgage mania and extended too much credit to too many unqualified borrowers. The article attributed the Swedish bank’s rare success to the fact that it was family-run and, therefore, able to avoid share-holder pressures to produce short-term profits by taking a much longer and more sanguine view of the business. Philanthropy-seeking organizations could take a lesson from this example.

We have a tendency to emphasize short-term fund-raising results at the expense of long-term potential, if not the soul of philanthropy itself. Strong words, I know, but let’s take a look at some facts and ask ourselves if we all don’t stand to gain by taking a longer, broader view of the dynamics of philanthropy. Let’s use higher education as a case in point.

The making and shaping of a higher education alumni supporter is a 50-year process. It begins when student first steps foot on campus and culminates 50 years later when that former student makes an irrevocable decision about the disposition of his or her estate. The most crucial part of that span, in terms of making the future philanthropist, is the undergraduate years. The actions taken by colleges and universities during those years will either predispose students to give back for the rest of their lives, or not. Yes, providing a wonderful education is of enormous importance but not sufficient in and of itself. These institutions must create not just a caring culture but one that makes as many students as possible feel as if they “belong” and as if they are being thoughtfully “coached” to achieve their full potential. Good coaching involves good teaching but is much more. It is a way of analyzing individual strengths and weakness, of strengthening the former and mitigating the latter, of finding the best ways to test those talents, of giving students the chance to strive, fail, learn and strive anew with the right amounts of challenge and encouragement along the way. Such cultures are the result of careful design and the deep commitment of many faculty and staff members. They cannot arise out of the classroom experience alone but through a combination of curricular and extra-curricular offerings (student activities, internships, sports, service organizations, study abroad opportunities, etc.). Such a culture creates deep bonds that, with a modest amount of institutional reinforcement, persist over a lifetime. And, yet, all that may still not be enough. The example and power of philanthropy must be held up if it is to be emulated.

So, yes, I believe that colleges and university leaders must inculcate philanthropic responsibility during the undergraduate years. This can be initiated in a rite of passage such as a thoughtfully crafted freshman convocation in which students are told that the quality of their education and campus life has been immensely enriched by philanthropists who gave their time, talent and treasure so that successive generations of students might better realize their potential. Students should be told that they are the beneficiary of many gifts and to look for signs of them across the campus and throughout their undergraduate years. They should be told that none of us fully come of age if we believe that those gifts were only for us in our time. They should be challenged to think about how they can use those gifts for the betterment of others and then pass them on to future generations in such a way that they are of equal or greater value.

I also believe that letters and ceremonies that announce the awarding of scholarships should address the moral obligation that attends their receipt. Recipients should be told, in effect, “This scholarship has been made available to you through the generosity of a forward-looking benefactor who has given a portion of the fruits of his or her labor so that you might pursue your full potential. We know that you will do the same for the successive generations of students when you achieve the ability to do so.” This kind of inspiration and direction begins to point young people in the right direction, but even more can be done.

Some colleges and universities try to promote the spirit of philanthropy by asking students to give to a class project, annual fund or campus priority. The emphasis is usually on the students’ rate of participation rather than the size of the gifts. This can be wise if it is part of a larger plan but philanthropy is not taught by making the student the object of fund raising appeals. Indeed, repeated asking without a clear and compelling case for how the money is to be used, and with a tone of expectation or entitlement, can cause some to see philanthropy as a euphemism for clubby coercion.

The best of all ways to point students toward a philanthropic life, I believe, is to treat them as institutional stakeholders. Yes, rites of passage, the inculcation of moral obligation, and active participation in civic and philanthropic activities are of great importance but they do not necessarily invite full participation in the life of the institution. That is only achieved when students are treated like all other significant stakeholders and investors. Just as wise parents use the dinner table or family meetings to educate their children about managing the family budget or to talk about the realization of family plans, enlightened leaders of institutions of higher learning should keep students fully informed, and allow them to engage in substantive discussions about institution’s aspirations and struggles. For instance, the presidents of many colleges and universities have done an excellent job of keeping faculty, staff, alumni and parents informed about the impact of the current deepening recession. These presidents have conducted town hall meetings on campus and in strategic locations across the country to keep the confidence of their key constituents. Some have called emergency meetings of the governing board, faculty senate and other important deliberative bodies or issued a series of candid communiqu├ęs to their extended alumni community.

But, as laudable as all that is, how often have those same leaders reached out to their own students with the same sense of urgency and accountability? Is it not odd and ironic that town hall meetings would be held for every critical constituency except students? Is it not curious that a graduating senior might be seen by campus communicators as a secondary target while a recently graduated alumni would be seen as primary? Should we not do everything we can to deepen students’ understanding of the place, including its greatest struggles and most exciting opportunities, while they are still on campus and so readily within our reach? Failure to make the most of the students’ time on campus consigns us to employing more expensive strategies to make them feel like stakeholders after they are gone. Would not young alumni be more receptive to addresses and requests from the president, whether in person or in writing, had they been grounded in the critical issues facing the campus while they were still students? Would they not be more apt to personally empathize with the president’s challenges or respond to the president’s vision if they had become more familiar with the person while on campus?

Indeed, the institution that does the best job of treating the student as stakeholder lays the strongest foundation for future philanthropy and cost-efficient fund raising. In my next blog post, I will explore the next most important period in the development of future philanthropists – the first five years after graduation.