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Trusteeship Magazine

Foundation Boards and Fund-Raising Teams: A Win for Higher Education

By Michael J. Worth
July/August
2011
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Private support of public institutions has become increasingly vital as state appropriations per student have dwindled. Building and strengthening the board of institutionally related foundations is a key to increasing fund-raising capacity.

Some foundations boards are active in raising and giving money to their institutions, according to research by AGB, while many are in transition to a more active fund-raising role.

Through fund-raising work, foundation boards can have a major impact on important institutions that shape the lives of millions and are vital to America's economic future.

When I was director of development at the University of Maryland College Park in the early 1980s, I supervised only a few people and commanded limited resources. Today Maryland has a substantial staff of highly experienced advancement professionals and is among more than a dozen public universities engaged in campaigns with goals of $1 billion or more.

The changes are just one example of the growth in fund raising at public institutions across the country in recent decades—growth that is transforming the role of institutionally related foundation boards.

In my early years at Maryland, fund raising was on the margin of the institution; the additional revenue was useful for new initiatives, but it was far from driving the university's advancement. I subsequently served as vice president for development and alumni affairs at The George Washington University. Thirty years later, things have changed dramatically at College Park. Private support is now central to the university's aspirations for the future and increasingly important even to meet current operating needs. And that trend at many public institutions is continuing, indeed accelerating, in response to a new financial landscape.

Private support of public colleges and universities has become more important because state support has been reduced. State governments have shifted the burden of paying for higher education from taxpayers to families, through higher tuition. Private gifts are vital to support growth and quality while keeping higher education affordable.

Budget cuts since the recent recession have been especially severe, but state appropriations per student have largely been declining since the 1980s. For example, state appropriations, in constant dollars, were $7,993 in 1987 and only $6,451 in 2010. Enhanced fund raising has helped fill the gap for many flagship campuses, but most public institutions still face an urgent need to increase their fund-raising capacity. That usually means building or strengthening an institutionally related foundation and redefining the role of its board.

The Evolution of Institutionally Related Foundations: New Data

The first institutionally related foundation was created at the University of Kansas in 1891. Like many that followed, it was initially a passive repository, designed to accept and manage private gifts that were offered to the university, but not a fund-raising entity. The foundation could ensure only that gifts would be kept separate from the state treasury and that they would be used for the specific purposes designated by the donors.

But in recent decades, many foundations have undertaken a more active role in fund raising. Foundation board members today are moving beyond their responsibilities as fiduciaries and managers of foundation assets to provide fund-raising leadership, similar to the trustees of independent colleges and universities, who have long been among their institutions' major donors, fund raisers, and campaign chairs. This transition is essential to increasing private support for public universities and to ensuring the future strength of public higher education.

In 2010, AGB and I worked together on a study of 129 institutionally related foundations, intended to obtain a snapshot of foundation board engagement in fund raising today and to identify some promising practices for foundation boards that are navigating the transition to a more active role. The foundations studied are affiliated with all types of public institutions and range from some with assets of over $500 million to small foundations with less than $25 million. Some are independent of their institutions, and others are entirely dependent on institutional resources. The majority are interdependent, meaning that they rely on some institutional resources and staff as well as their own sources of revenue.

The study found that the role and engagement of foundation boards vary considerably. Some boards are active and effective in giving and fund raising, while others remain primarily fiduciaries and passive managers of gifts received by the foundation. Many are in transition to a more active fundraising role. When asked about the board's engagement in fund raising, one foundation executive replied, "Our board is more advisory and less active in pursuing gifts." At the other end of the spectrum, one said, "Our foundation board members are actively engaged in the identification, cultivation, and solicitation of private gifts to the institution." But many described a board undergoinga process of evolution.

For example, one respondent explained, "Our foundation board does not play a significant role in fund raising. Just this past year, they have engaged in a feasibility study as well as a board-development plan to begin a more active fund-raising role." Another reported, "Our board is becoming more effective. Some members are very involved; others are just beginning to get involved." A third replied, diplomatically, "Our foundation directors have a growing sense of their responsibilities."

The Fund-Raising Team

Why is the foundation board's involvement in fund raising important? Because successful fund raising requires a team effort, and volunteer leaders are essential members of the team. One way to understand how an effective fund-raising team operates is to think of it as a highly unusual football team.

Board members are the team's owners. They are responsible for the success and sustainability of the franchise. They set the standards for overall team performance and monitor results. But, unlike in the NFL, on the day of the game the owners are expected to come down from their sky boxes and play on the field—to become personally involved in the fund-raising process. Sometimes they run with the ball— that is, they cultivate and solicit donors directly. Other times they may play on the line, creating an opening for the president or the chief advancement officer to run through.

On the fund-raising team, the institution's president holds down three jobs at once. He or she may be a member of the board, and thus an owner, but the president is also the coach. He or she sets the game plan and leads, guides, inspires, and sometimes pushes the team to high performance. The president is also the team's star running back, often the one who advances the ball, that is, the institution's cause. He or she often will be among the most visible players on the field—cheered by the fans on winning days and booed when the game goes south.

The chief advancement officer is the quarterback. He or she calls the plays and may sometimes run the ball, but often hands it off, or passes it, to other members of the team. The chief advancement officer's role is complicated, too, in that fellow players (that is, the board and the president) are also the owners and the coach. If the institution's chief advancement officer is also the chief executive officer of the foundation, he or she may work for both the president and the foundation board. But he or she also sometimes needs to push the coach and the owners to high performance as members of the fund-raising team.

The coordinated efforts of the entire team are necessary to success. A president, a chief advancement officer, or a board member operating alone is about as likely to raise significant funds as a sole player on the football field is likely to score a touchdown.

The "owners'" role can be especially complex at public universities because there are two boards that share some ownership responsibilities. The institutional board determines institutional directions, goals, and policies and monitors institutional performance. The foundation board often takes the lead in setting fund-raising goals and in monitoring fund-raising performance.

This requires that the two sets of owners work together in a coordinated way—that is, with the same game plan.

If the foundation board desires to be effective in fund raising for its institution, two things are essential. Board members should set the pace through their own giving, and they should be actively engaged in the identification, cultivation, and solicitation of others. The active involvement of board leaders in cultivation and solicitation activates the power of peer relationships and adds credibility and authenticity to the foundation's request for support. To be credible—and confident— in soliciting others, board members first must set an example through their own giving.

Foundation Board Members as Donors and Fund Raisers

AGB's study in 2010 found that most foundation board members are donors to the foundation, with 85 percent making at least an annual gift. But there is room for improvement. Less than half have made a capital gift, and less than 10 percent have reported a planned gift arrangement to benefit the foundation.

While there are, again, wide variations among foundations, most board members are not yet actively involved in the cultivation and solicitation of gifts. About 30 percent of foundation board members have participated in soliciting a corporate or foundation gift, which for many may cause less discomfort than soliciting individuals for gifts. Fourteen percent have participated in the solicitation of an individual donor while accompanied by the president or an advancement officer, and only 8 percent have solicited a gift alone.

But over 60 percent of foundation board members have participated in an activity or event related to stewardship of a donor relationship. For boards that are in transition to a more active role, involving directors in stewardship activities may be an easy first step that will lead eventually to their involvement in other aspects of the fund-raising process.

Promising Practices for Foundation Boards

What are some promising practices that foundation boards can put in place to accomplish a transition to a more active fund-raising role? Here are some suggestions, drawn from AGB's study:

Recruit foundation directors with the capacity to give and engage in fund raising.

To quote management expert Jim Collins, it is essential to get "the right people on the bus." Expertise that helps meet the foundation's fiduciary responsibilities, such as managing investments, is still a very important consideration in selecting new board members. Eighty-five percent of the foundations surveyed by AGB rated it as "very important" or "somewhat important." But responses also show that the capacity to give and raise funds also has become a high priority. Ninety-three percent said that the ability to make a significant gift is "very important" or "somewhat important" in selecting new board members; less than 8 percent said it is "not very important." The ability and willingness to raise funds from others ranks close behind. Eighty percent said it is a "very important" or "somewhat important" criterion in board appointments; only 21 percent said it is "not very important." (See Table 1.)

Be clear about expectations from the beginning.

Most board recruits will be sophisticated people who will raise the question of giving expectations during the enlistment discussion. It helps to have a clear answer. Almost 60 percent of foundations have a formal policy that requires foundation directors to make some annual gift. About half of those require an explicit minimum gift. There is consensus on the importance of giving by foundation board members, but the idea of a minimum-gift requirement is controversial. The majority of foundation chief executive officers at foundations without a minimum-gift policy do not favor adopting one.

• Keep fund raising visible to the board and focus on board performance.

If fund raising is important, then it should always be on the agenda for board meetings. Almost 83 percent of foundation boards do receive reports on overall fund-raising performance, but the board's own performance is often not highlighted. Fundraising progress reports presented to the board explicitly break out board-member giving only 25 percent of the time. At 46 percent of the foundations in AGB's study, board giving is never explicitly reported at a meeting.

A board meeting is surely no place to single out individual directors whose giving may be disappointing— those situations should be dealt with privately, one-on-one. But board performance can improve only if measured and discussed. Openly acknowledging board members who have made or helped close exceptional gifts may be a good way to begin creating the right environment and establish positive examples.

• Build a strong development committee.

Seventy-two percent of foundation boards have a standing committee on development. This committee has responsibility for setting fund-raising goals, monitoring fund-raising performance, and working with the institution to assure that fund-raising priorities align with institutional priorities and plans.

The development committee also takes the lead in the board's own giving. The committee chair is often the person who solicits board members' gifts and who undertakes a sensitive conversation with any foundation director who is not meeting expectations. But the development committee should not be viewed as—or be called—the "fund-raising committee." Fund raising is a responsibility of the total board and of each individual board member; it is a central activity of the foundation and cannot be delegated to a single committee.

Provide board members with the tools they need to be successful.

People who join foundation boards are usually not professional fund raisers. They almost always have been highly successful in their own careers, but fund raising is a specialized pursuit for which they may need additional preparation. Some foundations are providing their boards with training workshops on the skills of donor cultivation and solicitation. Others make philanthropy and fund raising the focus of board retreats, often bringing in a consultant or other expert to lead the conversation. That can help increase the board's understanding of the bigger picture in higher-education philanthropy and create a culture of giving and fund raising.

• Build a partnership with the institution, including its board, president or chancellor, and advancement-staff leaders.

Foundations exist to serve their institutions. The priorities and goals of institutions are the responsibilities of their governing boards and presidents or chancellors. The division of responsibility and authority between the institution and the foundation must be respected. A foundation board that tries to leverage its capacity to raise private support to gain inappropriate influence over the priorities and policies of the institution is not being helpful and can create an intolerable situation for the president or chancellor and the foundation executive.

But it is also understandable that, as private support becomes increasingly important to public institutions, those who make and raise gifts will have opinions about how the institution should proceed. They should be consulted and their input considered in establishing institutional goals, especially if achievement of those goals will require a substantial component of private support. AGB's 2010 study explored some areas in which tension between foundations and institutions could arise. In most cases, responsibilities seem to be properly assigned.

For example, foundation boards most commonly establish gift-acceptance and investment policies, while institutional governing boards usually set policies for the naming of academic units, buildings, and endowed positions. That division makes sense, since the institutional board is responsible for assets and programs of the institution, and the foundation board is responsible for the private resources given to the foundation. If the president's fund-raising performance is evaluated at all, that is most often undertaken by the institutional board, to which he or she reports. At independent foundations, the foundation chief executive is usually evaluated by the foundation board. Those are logical divisions of responsibility.

But there are also areas of shared responsibility—for example, establishing fund-raising priorities and setting campaign goals—in which the boards and executives of the foundation and the institution should work together. That is sometimes achieved through overlapping membership on the two boards or a joint campaign steering committee. Institution presidents and foundation chief executives also play pivotal roles in maintaining communication and understanding between the foundation and the campus.

Maintaining and building the relationship between the foundation and the institution is, perhaps, the single most important best practice, essential to success in securing private support that will advance the institution. It requires and deserves the explicit attention of everyone involved.

The people who serve on boards of institutionally related foundations have accepted positions of great responsibility at a crucial time in the history of higher education and the nation. They are privileged to play such a central role in meeting one of the great challenges of our time: sustaining and strengthening our public colleges and universities. They have an opportunity that few others can share—to have a meaningful impact on the future of important institutions that shape the lives of millions and that are vital to our economic future. That privilege brings an obligation to give and help secure resources to enlarge the foundation's impact and advance the institution. The fund-raising work of foundation boards often may seem purely transactional: cultivating relationships, soliciting gifts, setting fund-raising goals, and assuring fund-raising success. But members of foundation boards should approach their work with a sense of larger purpose, as the future of public higher education may well be in their hands.

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