The Case for Institutional Advancement
John Lippincott, president of the Council for Advancement and Support of Education, continues his discussion of fundraising challenges with Craig Bazzani of the University of Illinois Foundation.
By Craig Bazzani
In the face of fast-eroding resources and belt-tightening measures institutionwide, the question of how much to invest in advancement efforts is fair game. Yet, according to John Lippincott, president of the Council for Advancement and Support of Education (CASE), institution leaders should think carefully about how to assess advancement's return on investment. Part One of this conversation between Lippincott and Craig Bazzani, senior advisor to the president, University of Illinois Foundation, Urbana, appears in the June 2010 Business Officer Insights column. Here, Lippincott and Bazzani continue their discussion of fundraising challenges in the midst of an economic downturn.
BAZZANI: What should chief development officers consider as rational ways to account for the costs of their activities as they help their institution leaders put together an intelligent program to raise funds?
LIPPINCOTT: First, I understand the larger concern here for all units to make cuts to help the institution balance its budget, but it's important to note that most institutions are currently underinvesting in their development programs relative to their fundraising potential.
One cautionary note is that institutions should tread carefully when it comes to imposing a levy on gifts to the institution, because that may actually discourage donations if donors feel a significant portion of their gift is going toward administrative costs. On the other hand, I would encourage institutions to talk to donors about gifts specifically designated to support the advancement office. Some donors will understand that such funding leverages the capacity of the institution to enhance philanthropic giving from other sources to support the mission and vision of the institution. Within limits, I also think it's appropriate to use unrestricted funds and endowment earnings to fund the advancement operation.
BAZZANI: To your point about underinvesting in an institution's advancement operations, is there a target or range in terms of a reasonable cost to raise a dollar to know you are getting a favorable return on investment?
LIPPINCOTT: This is probably the most frequently asked question we get at CASE with regard to fundraising. While it's a simple question, it requires a complex answer. In order to calculate the costs to raise a dollar, you first must agree on what costs went into raising that dollar. Should cost include maintenance of the alumni and donor database? Publication of the campus magazine? The salary of the president, who may be spending 40 percent of his or her time helping to raise money on behalf of the institution? So, you have to begin by defining the cost part of that equation.
Another challenge is getting beyond the assumption that there is a single correct ratio of spending to giving. If the goal is to spend the least amount to raise a dollar, then the simple solution is to spend nothing. You can then claim zero cents to raise the few gifts that come in by happenstance. In reality, the ideal ratio for a particular institution depends in large measure on the maturity of the advancement operation and the capacity of an institution's donor body. For some institutions it may be perfectly appropriate to spend 30 cents to raise a dollar. Even then, the question I would ask is, where else can you spend 30 cents and get a dollar in return?
At CASE we are trying to ask a different question, and that is, what can I reasonably expect to get in return for my investment in the advancement operation? We're now exploring that question systematically. We recently completed the pilot phase of a research project on this topic and will soon launch the full study, with results later this year. The last time we studied this issue was in the 1990s, and circumstances and donor trends have certainly evolved since then.
CRAIG BAZZANI is senior advisor to the president, University of Illinois Foundation, Urbana, and a former chair of the NACUBO Board of Directors.