Fundraising: how to get alumni to cough up

For some, the relationship between donor and university is more like therapy than business. "I had a donor give me very intimate details about his divorce proceedings. I thought 'stop talking, too much information' - but he was (really) talking about his financial picture, what that looks like and giving all sorts of information about the settlements," confides one senior fundraiser at a UK university.

Alumni fundraising is a skill - one that requires utmost patience and interest in the lives of others, according to the tales of those in the business.

"I just try to be a good listener and to be understanding," says the fundraiser, who wishes to remain anonymous to protect her donors. "They talk to you about how they make their money and what they want to accomplish, particularly those who have come into wealth in their lifetime.

"Sometimes people tell you stuff that you never in a million years thought that you would hear. I'm perpetually amused by the things people will say, the information they reveal about their finances and their personal lives."

For decades, UK universities have lagged behind their American counterparts when it comes to asking their alumni to stump up and invest in their future, but gathering large sums through philanthropic donations is more important than ever. Thanks to the recession, British universities need to tap new sources of funding and keep them flowing.

It sounds like a big ask, but recent research from the US suggests that all the UK needs to do is to look to its own past. A paper written by Eve Proper, institute co-ordinator of the Peabody College of Education at Vanderbilt University in Tennessee, says the roots of private funding for higher education are actually British, with early investment a key factor in the establishment of the universities of Oxford, Cambridge and many redbricks.

Her paper, "Bringing Educational Fundraising Back to Great Britain", published earlier this year in the Journal of Higher Education Policy and Management, concludes that mass investment from the state meant that UK universities forgot how to fundraise. "Government funding drove out most private giving as support of higher education was transformed into a government responsibility."

But circumstances are changing: public funding for higher education is set to plummet and when it does, something will have to plug the financial gap. Getting alumni fundraising right will become critical, but it is very easy to get it wrong.

Many US higher education institutions rely on a small number of big givers. UK universities also need to make the most of individuals who have the capacity and motivation to make large gifts. Yet major-donor fundraising requires investment and expertise. Those willing to put their hands in their pocket and pull out a six-figure sum expect time and money to be spent on them. Most of all, they want to be listened to, even by vice-chancellors.

"I spend as much time as possible cultivating the people who have the capacity to make a gift of $500,000 (£303,000) or more," says Brian Rosenberg, president of Macalester College, a small liberal arts institution in Minnesota. "It's very, very difficult to reach those high totals without this kind of leadership."

The UK is still learning these lessons. Vice-chancellors have been told that they cannot be credible fundraisers unless they have given a sum of money to the university themselves. Earlier this year, Eric Thomas, vice-chancellor of the University of Bristol, said he had been "spatchcocked" by his own staff, who tapped him up for a £10,000 donation over a boozy meal.

"I went to a lecture that was preceded by an hour and a half of wine and canapes, with another hour and a half of wine and canapes before dinner," he recalls. The next day his wallet was somewhat lighter.

But when it comes to dealing with major external donors, UK fundraisers, who lack the experience of their US counterparts, often make mistakes. "We get it wrong quite a bit," one fundraiser admits. "You make your best guess about what will work, but sometimes it doesn't. I've had a donor burst out laughing when I've asked them for an amount."

One university is known to be afflicted by "serial pledgers", who promise money in an attempt to open doors but never deliver.

Nevertheless, the picture is improving. A survey into philanthropic giving for the Ross Group and the Council for Advancement and Support of Education (Case) found that in 2006-07 the sector raised £548 million. In the two years to 2007, the figure grew by £168 million, showing the progress British universities have been making.

The Ross-Case survey collected data from 144 universities, including the largest and oldest institutions. Of the funds raised, £413 million was generated in cash and the remainder in pledges or gifts in kind. The average value of a big gift to a university was £115,000, often coming from trusts and foundations, as well as wealthy individuals.

In 2008, the Government introduced a three-tier match-funding programme managed by the Higher Education Funding Council for England. To encourage contributions to universities, smaller donations are matched pound for pound by public funds, although Philip Nye, a civil servant at the Higher Education Directorate, has since warned universities to be "realistic" about this opportunity.

"Things are improving and our universities are certainly more geared up for fundraising now than a few years ago," says James Turner, director of policy at the Sutton Trust, a charity formed in 1997 to promote social mobility through education. "Importantly, there seem to be signs that a wider range of institutions are realising the importance of philanthropic donations, which before was only the case in a handful of our oldest universities."

Despite his optimism, Turner points out that there is still much that the UK can learn about best practice from the US, and the Ross-Case figures make this clear.

Of donor income to the sector, more than half went to Oxford and Cambridge, with the two ancient institutions picking up £9 million between them. Other British universities lag behind the US, where even the smallest colleges have strong alumni networks generating substantial sums to support their institutions' operating costs.

Macalester, for example, has fewer than 2,000 undergraduates and just 164 full-time academic staff. Yet the institution regularly receives six-figure gifts, has an endowment worth about $665 million and is currently in the middle of a major international fundraising drive to generate $150 million over five years. The college has already raised $106 million towards that target, of which $40 million has come from just three donors.

Rosenberg believes that British universities face a major cultural barrier when it comes to alumni fundraising, whereas giving is part of the American ideal.

"In general there is a stronger culture of philanthropy," he says. "Outside the US, more things are supported by the state and there is that expectation. In the US there is a stronger belief that the reach of the state should be limited."

America's private institutions (as opposed to state universities) receive almost no public funding for undergraduate teaching. Consequently, alumni expect to have to support their alma mater throughout their lives. US government policy, which provides tax relief on donations, also encourages giving.

"If you're not going to receive public funding, then the expectation is that you're going to be reliant on private philanthropy," Rosenberg says. "That's part of the culture. In exchange for having less government regulation and intrusion, part of the deal is that as an individual you have to support these institutions. That's part of the social contract."

Proper's research calls this analysis a "broad simplification", but acknowledges that it has a basis in fact. "In both nations, the Government funds some higher education and some individuals donate to it. Nevertheless, there is a meaningful difference in public attitudes between the two nations. This has implications for fundraising."

For Rosenberg, the duty to provide support felt by former students is the key to the college's continuing financial success. "We have a ready-made constituency. Being a graduate is a motivator. Many of our alumni received financial aid and went on to be very successful. College was a vehicle for transforming their place in society."

So what can the UK learn from the US experience of fundraising? Rosenberg says universities must do their research and continue to offer a service to their alumni to be successful.

"Fundraising is really about capacity and inclination. The capacity part is very dependent upon research. You need to know who to target. Once you have that information you can build the right relationship."

Macalester nominates class leaders from each academic year who keep the school updated with contact details for the entire graduate cohort. The college also makes an effort to provide regular events, including gatherings that offer professional networking opportunities. This is a service that UK universities, outside Oxbridge colleges, rarely provide, yet even the smallest American institutions have latched on to the idea.

"Fundraising, when it's done well, is about a relationship, just like with a friend or with a family member," Rosenberg says. "Alumni have to feel like they get some value from that relationship. That's why it's so time-intensive."

Steve O'Connor, director of development at the University of Leicester, says that as redundancies rise amid the recession, universities can rebuild emotional relationships with graduates that could be financially rewarding in time.

"We can support them around continuing education and through careers advice and networking, especially for the newly unemployed," he says. "It would be good if you could go back for half an hour to the careers service at your alma mater."

Shaun Horan, director of external affairs at the University of Reading, agrees. "Networking groups are important, particularly at a time like now," he says.

But because of the climate, Horan believes universities in the UK must work harder than ever to court donors. "Government funding is continually falling, and there is no way back from that." He cites the shock of Harvard University's collapsing endowment. "That made a huge dent in its income. Diversifying income streams is very important. The experience in America shows that you can't rely on one source."

So what kind of income should fundraisers aim for, now that they are raising their game? Horan says £5 million a year is a realistic target for institutions, given that the UK sector has been fundraising seriously for only a decade or so, compared with a century or more in the US. The way to achieve this, he says, is to be direct: make the case, and then ask.

"One of the problems we have had in the past is that nobody has been asking," he says. "What we need to do is get across the message that universities change the world. That's what they're there for. Somewhere on a university campus they will find a cure for cancer. Universities are where those things happen. Part of it is about educating people about education. It's crucial and it needs support."

Economic arguments can also be made, as Rosenberg explains: "There is a lot of research to suggest that the single best way to stimulate economic growth is education. This is an argument that has a particular attraction for businesspeople: if you don't make this investment, the economy will suffer."

O'Connor says 1994 Group members have made a concerted effort to attract donors from those people who are interested in higher education and could be persuaded to invest. "It's our responsibility to package and present the benefits that investment in universities will bring," he says.

University fundraisers are not just following the example of the US: they are also working closely with domestic charities. O'Connor was head of fundraising at Barnardo's, the children's charity, before joining Leicester. It was clearly attracted by his third-sector expertise.

"It's inevitable that charities and universities outside the Russell Group will move more closely together in terms of the way they fundraise," he says. The biggest lesson is how to professionalise.

"The charity sector recognises that this is a profession and there are ways of approaching the work that will maximise success," O'Connor adds. "There are procedures to follow that will deliver our shared objectives."

Higher education has much to learn from the country's largest charities.

"They are highly successful at creating, developing and nurturing bespoke relationships," says Lindsay Boswell, chief executive of the Institute of Fundraising. "What will happen in the next year or two is that some of those lessons and that methodology will trickle down and have an impact on universities."

Universities can learn more by talking to charities, perhaps, than by fixating on US behaviour. "We mustn't get overly hung up about American university fundraising because the starting point, the relationship, is fundamentally different... there is in the US an understanding that past generations have helped create the facilities they have," he adds. "A clever university will look at the American model and apply its learning as appropriate for its own circumstances."

He also believes that the two sectors still know far too little about each other, and a relationship between them could be mutually beneficial.

"There are lessons that the university sector and the traditional charity sector can learn from each other. One of the fault lines in the fundraising world is that there is not enough overlap and cross-pollination."

One former alumni fundraiser, who left a London university for a career at a major international development charity, agrees that higher education has lessons to share. She found the fundraising environment within universities to be fresh and new: it innovated where charities stagnated.

"Because fundraising is more established in charities, there's actually less conversation between departments and less innovation than is perhaps springing up in the education sector, possibly because it is starting from a lower base," she says. "Universities are not only catching up with charities in terms of professional fundraising, but also in some cases are surpassing them. There's more investment in fundraising, more training provided to staff, better resources and salaries that actually retain workers."

Like charities, universities face the challenge of thinking up new ways to pull in potential givers. Leicester recently sold the contents of its old Student Union building at an auction open to former students. The bell that called time and a square of flooring from the student bar both raised significant sums, while one former student purchased a picture of Nelson Mandela. It had hung in the room where she first met her future husband, and as a teacher of citizenship she intended to hang it in her school classroom to spark debate about the meaning of democracy.

Yet it is the big givers who really deliver for a university, and they also take the lion's share of fundraisers' time.

Rosenberg says it can take up to six visits to a potential donor before the university can ask for a major gift. Once the question is asked, further hurdles appear.

"There's a concern about these individuals having undue influence," he adds. "We have to be clear with donors about what the limits of their influence are."

Universities have to make it clear that their contacts are making a charitable donation, not buying influence. Donors cannot control where their money is spent: if they pay to employ a new professor, they cannot specify which academic takes up the post.

Dealing with ridiculous requests in return for donations is also par for the course. At one UK university, a major donor asked medical professors where he could buy a cure for his illness (for which no secret or trial cure existed) after handing over his cheque.

In the US, naming opportunities are popular. "One of the donors thought it would be quite funny to name the locker rooms of a new sports centre," a fundraiser admits. "They were very happy to name the restrooms."

Back in the UK, arguments over the minutiae of donor-funded projects regularly break out. One fundraiser says: "The building can be splendiferous, but if they think the chairs look like something from McDonald's they're going to sound off."

At least in part because of such expectations of influence, some in the UK sector worry about an emphasis on major donors. Paul Hoskins is the managing director of Precedent, a communications agency, which is putting together a report on the state of alumni fundraising in the UK. He thinks universities need to learn some lessons from Barack Obama's presidential campaign.

The US President, who for much of the race was considered an outsider, gathered huge sums to support his campaign by appealing to all Democrats and asking them to make a small gift. The result was astounding. Previous candidates, including former President Bill Clinton, had taken the more traditional route and courted a small number of major Democrat donors, generating only a fraction of the financial support enjoyed by Obama.

Nevertheless, the size of the investment in fundraising seems to be the key. The Ross-Case survey shows that in 2006-07, universities spent £55 million on fundraising and each university employed an average of ten staff to do the job. However, as averages, these figures mask important differences.

Institutions with established fundraising programmes spent, on average, five times more than those that had been doing it for less than ten years. Moreover, the most established fundraising universities also secured the most lucrative cash gifts, so it seems that investment pays off. Yet it is also a chicken-and-egg argument: does the investment work, or are universities investing because there have been successes?

"I think that if we're going to go about it seriously, we have got to invest and that's a difficult decision to make," O'Connor says.

Horan believes that it is possible to generate £10 for every £1 spent on alumni fundraising, but he worries about universities investing huge sums in the tactic. "Some places have made a huge investment upfront. It's taken a while for the benefits to come through. Steady growth where you're adding something each year is sensible."

The one thing that universities must not do in a recession is cut back their investment in fundraising, experts say. The difficulties do not mean that activity must cease, according to John Kelly, president of Brakeley, a fundraising consultancy. Ten members of staff may not be enough to visit all the potential major donors in an institution's portfolio, he observes, so universities should send out academics instead.

"Professionals don't have to do all the visits themselves," he explains. "If you can draw in academics to do some of the meetings, that's more likely to take the relationship forward."

Unlike other fundraising bodies, universities have a unique story to tell - and this is the key to successful fundraising. Young Dawkins, vice-principal for development at the University of Edinburgh, says: "This is not charity, it's an investment in the quality of society. Since I have been in Scotland I've had to work very hard at convincing people of that."

Shipped in from the US to overhaul alumni relations at Edinburgh, Dawkins has learnt lessons that could inform American institutions.

"If I could take one thing back, it would be to slow down and spend more time thinking about why we're really doing this, and making the case," he says.

Proper's research shows that building a culture of alumni loyalty takes time. Her study also questions how the first generation to shoulder the cost of their university education through tuition fees - graduates who will still be paying off student debt well into their thirties - will react to being asked to donate in future. This will take time to become clear.

"It may take a financial crisis before real increases in voluntary giving occur," Proper concludes. As the economy falters and institutions stare down the barrel of bankruptcy, now may be the perfect time for universities to focus on fundraising.

When to pop the question: a v-c's point of view

I have never been comfortable asking people directly for money, although this seems increasingly expected of vice-chancellors.

When is the right moment? Exactly when do rich people part with their money? After a convivial wine-fuelled evening or at a brisk business-style breakfast?

And how do you frame the question? "The university would very much like you to give us... say... a gift... of about... I don't know... a thousand pounds... I mean... a week?" Or is it: "Look, I know you are a person of substantial means, and the university has limited resources. Perhaps you might like to arrange an exchange?"

Applying for charitable grants is straightforward - you either get the money or you don't. But then it's easy for everyone else, and the pond is running dry. Other well-tried forms of fundraising, such as special events, carry high risks and modest margins.

Of course, it does depend on the type of university. Some appear to just sit there and wait for the unsolicited, unconditional millions to arrive. No doubt a good deal of work goes on behind the scenes, but ancient universities can offer eternal association, unlike newer institutions with more uncertain futures.

My own alma mater carefully attended to former students, with life membership in the long-established alumni association on offer on graduation day for a very modest sum. Social events, reunions and anniversary dinners were arranged.

Occasionally a solicitous letter arrived from the current vice-chancellor mentioning a particular project, but rarely a request for substantial money. It didn't matter that few of the graduates over the previous century ever responded to such appeals, because once in a while an executor would deliver an unexpected bequest, even an entire estate, in appreciation for halcyon days half a century earlier.

Many universities were never able to provide that kind of experience, particulary former polytechnics whose largely local and generally less prosperous students were less inclined to form alumni associations.

Graduates of many universities have prospered and become targets for fundraising, yet they are often strangers to the university now and it is difficult to ask a stranger for serious amounts of money. Even when the donor is not a stranger, it can be deeply frustrating when the expected large bequest, expensively cultivated, turns out to be a small donation to the library.

Moreover, maintaining the illusion that the institution is the one that potential donors remember poses a significant challenge for fundraisers as the environment evolves.

There is another and more worrying dimension to personal fundraising. What if the target donor turns out to be politically unsavoury or engaged in somewhat marginal practices? What should a green university do when a donor turns out to have a heavy carbon footprint, or has run a successful business while limiting workers' rights and pay?

Should we not run the equivalent of a Criminal Records Bureau check on our benefactors? Is any bequest worth having, whatever the source?

Given the marked reluctance of the British towards charitable giving, it will be some years before the current phase of fundraising makes any real progress. In the meantime, there will be more painful dinners, searching for the right moment and phraseology, and preparing oneself for the raised eyebrow and the caustic riposte: "So that was your only reason for inviting me to visit your university after ignoring me for 50 years?"

The author is a former vice-chancellor and lapsed fundraiser.

Despite the downturn, billion-pound campaigns remain on target

The fundraising giants will not be moved. Although the universities of Oxford and Cambridge were in the middle of major fundraising campaigns when the recession hit, neither is adjusting its ambitions.

Cambridge aims to raise £1 billion by 2012. The public phase of the campaign was launched in 2005 in the run-up to the university's 800th anniversary celebrations. By the end of 2007-08, £801 million had already been raised.

"This performance puts the campaign about two years ahead of where we had expected to be at this stage," says Peter Agar, director of development and alumni relations at Cambridge.

The university has admitted that the fundraising environment has become more difficult, but it says that the campaign continues to make good progress.

"We are not complacent about the pressures that many individuals and charitable trusts are under, but we have not seen, in our own performance, any reason to adjust our target or the timetable for the campaign overall," Agar adds.

Regular giving programmes have held up well, and some Cambridge colleges reported that income from their telephone campaigns rose over the Easter break. Major-donor fundraising, however, has been hit.

"At higher levels of individual giving, donors are still engaging with the university and the colleges, but it is clear that decisions on gifts are often taking longer to make, particularly at the seven-figure level," he says.

Despite these problems, the university will not be making any changes to its fundraising strategies.

"The campaign's success to date has been built along developing a culture of giving among alumni in general, and on the development of long-term relationships with major prospects, engaging them in the substantive areas of teaching and research that match their interests and passions," Agar says.

"We have continued to build those relationships over the past year while recognising that the 'ask' and the decision to give will, in some cases, be delayed."

Oxford Thinking, the university's alumni- fundraising initiative, aims to raise £1.25 billion. That goal has remained unchanged despite the economic climate, and Oxford so far has gathered £680 million from donors. Moreover, £105 million of that total has been raised in the past 12 months.

In addition, in March this year, James Martin, the entrepreneur, pledged $50 million (£30 million) in match funding to encourage others to continue giving despite the global economic downturn.

"In making that pledge, Martin said that while donors may be distracted by today's credit crunch, they should not forget the bigger picture - the need to safeguard a future for the generations that follow us," says Ruth Collier, an Oxford spokeswoman.

"Donors' generosity is vital to the university through the global financial crisis, and the signs are that this generosity continues, with people wanting to invest in higher education and in internationally respected research."