Giving in Tough Times

Business school fundraisers view the recession as both challenge and opportunity. It’s a chance to perfect strategies, reach out to donors, and lay the foundation for a stronger financial future.
Giving in Tough Times

When Heidi Woodbury of the University of Utah’s David Eccles School of Business in Salt Lake City received a call last December from a representative of a Utah foundation, she wasn’t sure what she would hear. After all, the stock market had just plunged and the immediate future of the school’s fundraising efforts was uncertain. To Woodbury’s surprise, the foundation wanted to make a $25,000 gift to the business school, no strings attached.

Although the pace of giving has slowed, there are bright spots such as these at what is otherwise a bleak time for business school fund raising, says Woodbury. But she admits that even though the economy may be showing signs of life, many donors still are taking a “wait-and-see” approach to giving.

“Most donors aren’t saying ‘No,’ but they’re saying, ‘No, not right now,’” says Woodbury. “People are still giving, but many are being conservative with their cash.” Several corporate donors to the Eccles School have taken a break from their corporate giving in 2009, while others are giving at lower levels.

The challenge for b-school fundraisers is how to make the most of a recession-era economy. It may not be a good time to expect the big checks, says Woodbury, but it is a good time to experiment with new methods, engage with the community, attract more attention, and make friends for the future. Schools that take these steps, say fundraisers, are likely to find themselves in stronger positions when the economy rebounds.

Lowered Expectations

Like many other business schools, the Eccles School has been hit with a budget cut from the state, which only exacerbates the effects of depressed giving rates and a shrinking endowment. It also translates to lower expectations for the school’s capital campaign, now two-thirds of the way to its $100 million goal. For instance, the school’s original goal had been to spend $80 million on its new building project, but given the slower pace of fund raising, the school may try to reduce the cost of the building to $70 million.

Still, there may be some light on the horizon. Although seven-figure gifts to the Eccles School have not been forthcoming in the past months, several individuals have noted that they may be able to make significant pledges once the economy has begun to bounce back. “At this point,” says Woodbury, “we are very optimistic and continue to reach out to potential donors.”

The story is the same for the Culverhouse College of Commerce and Business Administration at the University of Alabama, Tuscaloosa, which has been conducting its $86 million fundraising campaign since January 2002. School fundraisers had hoped to finish the campaign by the end of June, but that timeline was extended, says Charlie Adair, director of development.

“While we recently received a significant donation to push us over the $80 million mark, we did not meet our June 30 deadline,” says Adair. “We spoke to many people at the end of last year who just weren’t ready to give.” A few donors have asked to skip payments, he says, but they have extended the terms of their pledges accordingly. When Culverhouse wrapped up its campaign in July, there was a “flurry” of donations, says Adair. “We closed a little bit short—just $1.3 million from our goal,” he says.

In light of the times, Culverhouse is changing the ways it connects to donors. For instance, the school is emphasizing e-mail and its Web site over print-based mailings. The school also keeps these messages short and simple, directing people to the Web site for more information.

These approaches don’t just save money—they keep the school’s communications effective, concise, and on target. That strategy may pay off when donors resume their philanthropic activities, says Adair. “The good news is that I’ve met with a number of corporate donors who are interested in giving $1 million gifts in the fourth quarter. Many are ready to start the conversation again,” he says. “I feel good about the next six months.”

Tough, Not Catastrophic

The top fundraising schools have been hit incredibly hard. In April, The Chronicle of Higher Education surveyed 12 schools currently conducting fundraising campaigns of $1 billion or more. It found that those campaigns saw an average 32 percent decrease in donations between March 1, 2008, and February 28, 2009.

That’s a huge dip, but it’s not the whole story, says Roy Muir, a consultant with Marts & Lundy, a New Jersey-based consulting firm that works with universities and other nonprofits. Such large campaigns often rely on massive gifts—and today’s economic climate can spur wealthy donors to think twice about the amount, structure, timing, and investment of a large donation.

The story is less dire for campaigns at institutions with smaller fundraising objectives. At the end of 2008, Marts & Lundy surveyed its clients to see how the economy’s reversal of fortune had affected annual giving campaigns. The 64 responding institutions reported an average 3 percent decrease in total money raised—not the best outcome, says Muir, but also not catastrophic.

The 22 private higher education institutions that responded told similar stories. Their average annual fund participation decreased by 4 percent from 2007 to 2008; total cash proceeds were down 3 percent. Seven public institutions reported a 6 percent decrease in alumni participation, and a 5 percent decrease in their total gifts and pledges.

Institutions in the public phase of major campaigns were the hardest hit among Marts & Lundy clients. They reported an average 22 percent decrease in new gifts and pledges, and a 10 percent decrease in total cash proceeds.

Many donors are ready to start the conversation again. I feel good about the next six months.
—Charlie Adair, University of Alabama

“There’s no doubt that many people are psychologically affected by this recession. Even if they haven’t lost their jobs or seen their investments drop, they’re uncertain about the future. That means they might give a little less,” Muir says.

But he also is hearing some good news. “Many clients are telling me that while cash is down, the number of donors is steady or up. They’re seeing donors who are actually increasing their gifts. They know that the money is important to the school right now.”

The ‘Big Gift’

The Anderson School of Management at the University of California, Los Angeles, has raised $48 million toward its $100 million goal in its current capital campaign. While the smaller gifts generated by its annual giving campaign are still important, the school plans to shift its attention to pursuing larger six- and seven-figure gifts as it enters the next phase of its campaign. The reason is twofold: Affluent donors most likely had larger financial cushions to begin with, and the school’s campaign has a very short timeline—only three years. By comparison, the school’s last $100 million push occurred over seven years.

“We’re making our case more strongly to let people know what we’re trying to accomplish,” says Marcia Shackelford, Anderson’s associate dean of development. So far, the strategy is working. The school recently finalized a $2 million donation from a manufacturing firm.

Last fall, the University of Washington’s Foster School of Business in Seattle completed an eight-year, $181 million campaign that supported scholarships, curriculum, and two new school buildings, including the 135,000-square-foot Paccar Hall scheduled for completion in 2010.

The building campaign, especially, placed new pressures on the fundraising effort, as the costs of construction continued to rise. In 2005, the school’s administration decided to focus more attention on donors with the capability of making eight-figure gifts, says Steve Hatting, assistant dean of development and external relations.

School staff and administration began to provide regular progress updates, on the Web site and in person, to inspire the confidence of high-powered donors in the school’s ability to complete the building’s construction. Those updates paid off: One donor, who already had made a significantly smaller pledge, increased his gift to $18 million after he learned more about the school’s progress. Shifting focus to larger donors was “critical to the school’s success,” says Hatting.

He admits, however, that the school completed its campaign just as the recession hit. Securing large donations in today’s economic climate is a more difficult task. Now that the Foster School’s campaign has been completed, the school is focusing its outreach on securing smaller gifts of $10,000 or $25,000. “As people see a third of their stock portfolios disappear, small gifts are more in line with what they will entertain,” Hatting says.

New Rules for Donors

The Foster School also has readjusted its outreach efforts to focus on scholarships and fellowships, where donors can see an immediate return on their investment. For instance, Foster’s development team is thinking of asking a donor to give an annual gift of $50,000 for four years to create two named doctoral fellowships each year. In return, the two students who receive the fellowships would stay in touch with the donor throughout their four years of study. Such a program would keep donors excited about the school, which may lead to more gifts to support doctoral education, endowed chairs, or professorships.

In addition, the Foster School has redesigned its Web page for online gifts. Online donations used to go straight into an unrestricted fund, but now the site includes what it calls “the Foster Five”—five categories for donors to choose from when making their gifts. They include academic departments, competitions, new construction, scholarships, and the unrestricted Foster Difference Fund.

While it may be tempting to eliminate alumni events to save costs, many school administrators are holding even more events to reconnect alumni to the school and help them weather the recession. UCLA’s Anderson School, for example, is holding events to help alumni with recruitment, career development, and networking; making sure alumni are active in its LinkedIn networking activities; and providing intellectual content in the form of guest lectures and seminars.

A session at AACSB International’s Conference and Annual Meeting in Orlando in April, “External Relations and Fund Raising in a Down Cycle,” focused on how schools can make the most of the current economic challenges. The session’s panel included Gail Naughton, dean of San Diego State University’s College of Business Administration in California; Mark Zupan, dean of the University of Rochester’s Simon Graduate School of Business in New York; and Andy Policano, dean of the Merage School of Business at the University of California, Irvine. The panelists emphasized that business schools that continue their campaigns, keep up their marketing and public relations activities, and increase the nonmonetary involvement of alumni and donors will be positioned well when the downturn reverses.

Many schools are creating multidimensional approaches to attract donors and get them excited about their programs. That might mean asking donors to support major initiatives or faculty chairs on a yearly basis, rather than through lump sums, says Policano. The Merage School also has created a tiered gift approach—or “donor pyramid”—for alumni, executives, and corporations, which lets them start at small sums and donate larger amounts over several years.

At the Simon Graduate School of Business, events on financial topics that used to attract only 50 or 60 alumni are now attracting hundreds, says Zupan. The media also has been calling on the expertise of Simon’s faculty more frequently. Such increased attention is the perfect way to inform and attract current and future donors, he said at the fundraising session in Orlando.

This is a time when organizations can look carefully at how they can build the strongest possible programs for the future and how they can tell their stories most effectively. —Roy Muir, Marts & Lundy

“Business schools can be beacons of knowledge, rather than whipping boys, during this crisis,” he says. “We have a big role to play to help the world understand what causes these cycles and how to mitigate their effects.”

A Time of Opportunity

While the next year or two might be a frightening time for those who’ve never managed a campaign during a recession, it promises to be an exciting time as well, says Muir of Marts & Lundy. “This is a time when organizations can look carefully at how they can build the strongest possible programs for the future, how they can bring value to society, and how they can tell their stories most effectively.”

Muir adds that while this downturn may take longer than others to reverse itself, it will come to an end. No matter what, campaigns will continue; schools will achieve their fundraising goals. The only difference between today and years past? It might take longer than they originally expected.