Giving cause for hope

This has been a momentous year for philanthropy towards higher education in Britain. The universities of Oxford and Cambridge have each announced that they have raised more than £1 billion since the start of their fundraising campaigns in 2004 and 2005, respectively. In August, the University of Edinburgh reported a gift of £10 million from author J.K. Rowling, and King's College London launched a fundraising campaign in November, marked by events on three continents, that aims to raise £500 million.

The same month, the Coutts Million Pound Donor Report 2010, published by the University of Kent's Centre for Philanthropy, Humanitarianism and Social Justice, revealed that the collective value of gifts of more than £1 million given to UK universities was greater than that made to any other single cause. Thus, higher education leads Britain's not-for-profit sector by a long way in major gift fundraising, and while Oxford and Cambridge account for a high proportion of the very large gifts, they no longer have a monopoly.

Less dramatically, there is increasing fundraising success in newer universities, prompted partly by England's introduction in 2008 of a three-year, government-funded matched-giving scheme designed to encourage new donors to higher education. Wales has followed with a similar scheme, and Scottish principals continue to argue for their own version.

All this would have happened with or without Lord Browne of Madingley's report or the coalition's Comprehensive Spending Review.

European universities are also starting to fundraise in an organised and successful fashion: international business school Insead's planned giving programme raised €3.2 million (£2.7 million) this year; École Polytechnique is running a campaign that aims to raise €35 million; and the International University Bremen was renamed Jacobs University Bremen following a staged €200 million gift.

Nevertheless, the Browne Review recognised the historic and future importance of philanthropy as an income stream for higher education, and the coalition has been vocal about its belief in the role of philanthropy in creating the Big Society. It would be odd if this expectation did not extend into higher education.

The question of whether universities can rise to this challenge is therefore of critical importance, not just to the directors of development who lead fundraising operations, but to governors, vice-chancellors, principals and their senior management teams as they plan institutional strategies for the uncertain years ahead. Can fundraising deliver, and if so how?

It is instructive to ask what we can learn from our own past, and what we can learn from other jurisdictions.

First, we must recognise that we do have a history of philanthropic support for higher education in the UK. It is easy to be deceived by the received wisdom that we have no modern tradition of giving to British higher education, and that the practice - which is common in the US and Canada - is not transferable.

Yet it is not only universities such as Oxford, Cambridge and Edinburgh that were built on private philanthropy. In the 19th century, the growing wealth of Britain's industrialists demanded and depended on middle classes educated in medicine, applied science and engineering. This led to the establishment of colleges and universities throughout the country, some of which survive as Russell Group universities, and others as predecessor institutions to the modern universities we know today.

The University of Wolverhampton traces its roots to the Wolverhampton Mechanics' Institute, founded in 1835 by public subscription, and De Montfort University is still using a building built in 1897 for the Leicester School of Arts at a cost of £25,000, again raised by an appeal. This sum equates to about £14 million today. Durham University's founding has a contemporary edge - a visionary clergyman persuaded his bishop, who had an embarrassing glut of wealth not dissimilar to that of the bankers of the early 21st century, to found a university. One man's vision and another's wealth combined to produce something good.

We can see that higher education of all types in Britain has a long history of attracting large gifts from those who care about its impact, and arguably especially so where government is unable or unwilling to provide the funds. So institutions should not feel daunted by the challenge ahead.

British public universities that compete academically with US Ivy League institutions can fundraise just as effectively, especially when they invest enough in the people to do it.

When it comes to learning from North America, problems arise only when like is not compared with like. When Margaret, now Lady, Hodge was minister for universities (2001-03), she visited the US and was enormously impressed by Harvard University's fundraising record, reporting that it raised $1 million every day. Her numbers were not hyperbole: Harvard's campaign required giving that averaged that amount each day, and the campaign succeeded.

Perhaps Hodge's words were prophetic: Cambridge has been raising money over the past five years at a rate that averages nearly $1 million (£630,000) a day, while Oxford's fundraising performance has been very similar, and both universities are continuing to attract gifts at this rate.

It is interesting to note that at these two collegiate universities the ratio of fundraising and alumni-relations staff to the total potential donor population is similar to that at a comparable institution in the US. The ratio is approximately one member of staff per 1,000 potential donors. This would provide an interesting benchmark for other UK universities as ambitious as Oxford and Cambridge.

The problem with Hodge's comparison, of course, is that not every UK university ranks in the top 10 globally. It is more useful to compare Britain's research-focused universities with public research universities in the US and Canada. For those more focused on teaching, especially those with a high proportion of local and part-time students, there is much to be learned from US community colleges. It is for these reasons that the Council for Advancement and Support of Education (Case) has been awarded a grant by the Higher Education Funding Council for England to run Leadership in Development Management study tours of relevant institutions in the US. Now in their third year, these tours have proved successful in bringing the best of US practice, suitably contextualised, into the UK.

There are fewer barriers than one might think. Cynics argue that - unlike in Britain - US alumni have an innate "culture of giving", but until recently this was largely limited to the private universities and colleges. In a speech in October this year, Louise Richardson, principal of the University of St Andrews, noted that in 1975, the total fundraising income at five leading public universities in the US was just $10 million. In 2005, the same universities raised $256 million. Thus US growth has taken just one generation and, as in the UK, this has been against the background of significant, continuing cuts in government support.

It is also argued that the US and Canada have tax systems more amenable to giving. However, it is Britain that has more generous relief on gifts of income. The only significant area where we differ is on gifts of assets, where the US has substantial tax advantages for those who wish irrevocably to give an asset, but to continue to enjoy it during their lifetime, even though it is on the charity's balance sheet. Here we need to make common cause with the cultural sector in arguing for what are being called "lifetime legacies".

Of course, some US institutions have been more successful at fundraising than others. A study by John Cheslock and Matt Gianneschi published in The Journal of Higher Education in March-April 2008 found a significant correlation between the selectivity of the institution (and arguably also its perceived quality) and relative fundraising performance. It also found that "results do not indicate that individual institutions counteract relatively poor state funding with relatively more private gifts".

But this does not mean that less selective, less prestigious universities cannot fundraise effectively. The quality of the fundraising team and feedback to donors is important; but the key is having a convincing reason why donors should give. Speaking at a Case function on regular giving, Rich Mintz of Blue State Digital, one of the architects of Barack Obama's online fundraising campaign, dismissed the notion that communicating a sense of obligation motivated alumni to give more. On the contrary, he argued, it makes graduates feel "passive-aggressive" and they don't even know why.

Instead, from a gift of a few pounds each month to support a bursary or buy a book, through to James Martin's gifts to the University of Oxford, which now total $150 million, it is the impact of the gift that appears to be the driver of increased giving. Donors want to know how their gift will change things and make the world a better place.

The dialogue must change from "please give so we can stay at the top/get to number x in a league table" into the answer to brand guru Michael Wolff's question, "What is the point of you?" In other words, how will a donor's gift advance their values and our goals?

This was certainly the experience of Sion Lutley, the University of Bath's director of development and alumni relations.

"If fundraising activity is directed properly with long-term investment and support from across the institution it can really work," he says. "At Bath we've seen 100 per cent growth in donations raised each year for the past three years. As we develop the culture of both asking and giving, we have increased the number of donor-funded scholarships and bursaries from 25 to more than 200 in the past two years. This sends a very positive message to both alumni and the students themselves about the impact that graduates' donations can have."

Joanne Finnie Jones, senior development manager (legacies) at the University of Edinburgh, agrees: "We have to get away from the begging-bowl language of 'seducing' alumni into giving and 'getting alumni to cough up', and move instead to the much more wholesome and convincing language of persuading people to give to important causes."

The US academy's most successful fundraisers have already internalised this.

Indiana University has done this in some style with a short video (http://bit.ly/individeo) which tells the story of a student who entered university on a scholarship and went on to change the world. The emphasis is much wider than the student or even the university itself, concentrating instead on the individual and institution as agents of change. Johns Hopkins' Knowledge for the World campaign similarly focused on the university's contribution to society.

The huge challenge, says Nick Blinco, the University of Birmingham's director of development and alumni relations, is to get universities thinking of themselves as charities. "Fifty per cent of our alumni give to charity, so why do only 5 per cent give to us?" he asks.

Often it is internal rather than external challenges that inhibit fundraising success. In this economic climate, one of the key challenges will be for universities to invest in their development programmes, rather than seeing them as extraneous and cutting back.

One development director expressed frustration that every department in the university, including the fundraising office, was expected to bear an equal share of cuts and the freezing of vacant posts, even though there would be a direct and predictable impact on income from the development operation.

Separately, data from individual institutions seem to show clear correlations between investment in development programmes and returns, and the impact of short- and long-term vacancies in development posts.

By contrast, at the University of Birmingham, investment in the development office is going ahead as planned, against challenging targets that have been negotiated with the vice-chancellor.

"We weren't expected to double income without consultation," says Blinco, "and we've been encouraged by the vice-chancellor and our volunteers to aim high."

This involvement by vice-chancellor and senior managers is critical. Peter Agar, director of development and alumni relations at the University of Cambridge, says: "Donors will have an increasing interest in questions about governance, how money is used, effectiveness and so on." These questions can only be answered by those with responsibility for them.

Real partnerships are needed between development staff who orchestrate fundraising, institutional leaders who hold the vision and academics who embody the university's impact. No single group can do this effectively on its own.

The focus on quality and impact is likely to be uppermost in the minds of vice-chancellors and their senior management teams in the coming months. A rigorous approach to this will help the fundraising messages, and a greater focus on student experience and employability will contribute to creating a group of interested and involved alumni who wish to stay engaged with their alma mater out of interest rather than obligation.

Jo Purcell, director of development and alumni at Middlesex University, states that the development office has to be integrated into university life even further. She has just returned from an exhausting but productive trip to East Asia to meet potential donors who have connections with Middlesex and its academic staff. She is clear that the relationship between potential donor and academic is a critical factor in a donor's decision to give.

It seems that, in respect of philanthropic income, this is a time of threat and opportunity. There is, rightly, considerable scepticism and concern about the extent to which the proposed funding changes will create a private market for the university sector in England. Perhaps paradoxically, this may prove a boon to university development. Shaun Horan, director of external affairs at the University of Reading, believes that some donors will be attracted by the idea that universities have more control over their own destiny. It is notable that Robert G. Edwards, winner of the 2010 Nobel Prize in Physiology or Medicine, was unable to secure funding to continue his pioneering research into in vitro fertilisation, but the gap was filled by a private donor.

It is also unclear whether charging higher university fees will encourage or discourage donations by alumni. Most charities find it is easier to get older people to give than younger ones, usually explained by greater maturity and disposable income. University alumni are a little different. There is evidence that alumni who paid fees are more likely to give than those slightly older whose education was free. The obvious explanation is that you value what you pay for. The other divergence from normal charity behaviour is in the 45-55 age group, where a general rise in giving with age is diminished. The most convincing explanation is that the cost of their own children's university education is a barrier to giving.

So will alumni who pay a lot more value their education a lot more, and continue contributing with age? Only time will tell.

Horan warns of the dangers, especially in the short term, of a loss of nerve, as does Bath's Lutley, who says: "Universities need to realise that fundraising, from alumni in particular, isn't something that can be turned on and off like a tap. It requires at least a medium-term, if not long-term, strategy if it is to deliver an alternative, sustainable source of income."

Some universities will grasp the nettle, and become increasingly confident about their vision and the way they communicate it. King's College London is clearly doing so with the recent announcement of its £500 million campaign, and Nottingham Trent University is quietly building its supporter base while fundraising for large projects. Blinco says of the University of Birmingham: "We could have taken the quiet route, but we've chosen to take the challenging one."

There will also be universities that will not embrace philanthropy as an income stream. If this is their choice then it is perhaps better that they consciously do this and plan an alternative, rather than finding that their peers have secured the flexibility and extra resources that private giving can bring, leaving them behind.