Independent schools throughout the Pacific Northwest of the US face an increasingly competitive and complex landscape.
New public and private school alternatives, lower birth rates, market-driven tuition price sensitivities and growing operational costs combine to present significant short- and long-term challenges. At a time when schools are looking to address these challenges through the addition of supplemental programmes, online courses and other sources of non-tuition revenue, endowment funds can provide a reliable and flexible revenue stream. They are also an important marker of a school’s long-term financial sustainability.
In collaboration with Northwest Association of Independent Schools in the US (NWAIS), fundraising consulting firm Collins Group, a division of Campbell & Company (Collins), located in Chicago, Illinois,1 conducted a survey of independent schools affiliated with NWAIS in July 2014 to explore how schools of all “ages and stages” can most effectively prepare to build or grow endowment funds.
Based on the 32 responses gathered from heads of school or those in development roles and extensive experience with independent schools, we developed the following set of best practices every school can implement to plan for, build and grow an endowment.
1. Start with a strategic development plan that goes beyond a calendar of annual activities. The plan should correlate to the school’s strategic priorities and include both financial and non-financial goals and the constituent-specific strategies, messaging, benchmarks and staffing you’ll need to reach them. This work will help staff and trustees monitor and evaluate the overall sustainability of your development programme, and expand thinking beyond whether the budgeted annual fundraising goal was met.
2. Include major gifts as part of your development strategy It can be daunting to launch a relationship-based formal major gifts programme. A focus on the essentials first to
build a culture of philanthropy can make it more manageable and set you on the path to inviting
• Create a top prospect list – whether 15 names or 150 – starting with your trustees. Regardless of capacity, trustees will only understand the importance of a donor-centred approach to your school’s major donors if they are each treated like a major donor. Requests to board members and others for personally meaningful “stretch” gifts2 versus “100%” participation gifts3 will set the stage for significant endowment investments in the future.
• Tailor strategies for developing relationships for each prospect, for each step of the donor journey – cultivating, asking and stewarding. The strategies should “find the match” between a donor’s interests and values and those of the school. Effective stewardship should begin with a meaningful thank you, communicate the specific impact of a gift, and build donor loyalty.
• Compose a board that reflects your school’s fundraising priorities. If growth in philanthropic revenue is a goal, the board should include socioeconomic diversity – including those stakeholders with capacity to make major gifts as well as access to other prospects.
• Invite trustees and other development volunteers to be partners with the head of school and development staff in meetings with major donor prospects. It conveys the importance of the opportunity. More importantly, only a peer can say “join me”.
• Invest time and money in training to build the skills and confidence of staff and volunteers to be effective champions for major investments in your school.
• Capture and track donor information and activity in a database. Every phone call, meeting or e-mail that moves a relationship with a major donor forward should be documented to ensure coordination and progress.
3. Create a case for giving that clearly distinguishes what your annual fundraising activities and endowment income make possible. It will be easier to make the case for
endowment when the school community, including prospective and new parents, is better educated about the difference philanthropy makes.
A simple approach to this message is:
• The annual fund is a cheque account: Funds are raised and spent in the same year for immediate needs. Instead of pointing to school supplies and light bulbs, focus on the ability to recruit and retain outstanding staff, expand programmes and ensure broader access for mission-appropriate students. The strongest motivation for donors – often current parents and grandparents – typically will be a direct benefit to today’s students.
• The endowment is a savings account: Endowment dollars raised today will protect the mission in challenging times and leverage opportunities in good times. The strongest motivation for donors – often alumni, alumni parents and grandparents who have been giving for some time – typically will be gratitude and/or the desire to carry forward a tradition of generosity for future students and their families.
4. Use a variety of strategies to fuel endowment growth.
There’s no need to pick only one strategy to start or build an endowment. For board-designated endowments, you can seed it, for example, with existing reserve dollars, through a line item in the annual budget, or from a surplus in annual giving.
Donor-designated endowment funds can be from outright or deferred gifts. In both cases, encourage unrestricted gifts, but offer choice among broad categories like teacher development or programme excellence, especially for larger gifts. For younger schools or elementary schools with young graduates, don’t let the variety of planned giving options postpone an invitation to make deferred gifts. Even one line on your website that encourages planned gifts can uncover the bequest of a grateful alumna/e or grandparent.
When a portion of annual earnings are reinvested into a fund’s principal, even a small endowment will grow over time. While most endowments are managed professionally, an investment committee offers an important place to engage top prospects who do not have the time or interest to serve on the school’s board.
5. Allocate resources to educate staff and board leadership about endowment as a revenue stream.Endowments can be complicated and will take time and repetition to understand; there are different types of funds, for different purposes, accounted in different ways on the school’s balance sheet. Sometimes the best form of training is hands-on. Identify opportunities for board members to be a part of asking or thanking a donor for a gift to the endowment. When considering annual professional development budgets for development staff, look for conferences that include endowment and planned giving topics as an option.
6. When it comes to alumni giving, take the long view It starts with student involvement in philanthropy, from their own community service projects to thank-you calls for the annual fund to tagging items at the school auction. Once students graduate, parents are often the best connection; pay special attention to their continued engagement even though they aren’t in the drop-off line every day. For elementary schools – where many parents make their lifelong friends – find annual opportunities to bring the whole family back to campus. For secondary schools, ask parents to help the school keep in touch with graduates as they move through college and beyond. The time between a post by a recent graduate on your alumni Facebook page to their first gift may be at least a decade, so consider that the investment of time and effort in alumni relations may be a long-term strategy.
7. Recognise donors by giving levelThe most effective way to educate and inspire members of your school community – whose capacity may not match their experience with or understanding of philanthropy – is to recognise donors by giving level. While many schools fear that this form of recognition will foster an exclusive culture of philanthropy, in fact the opposite is true; it helps to make money conversations less taboo, inspires those who seek peer recognition, and models generosity for donors who may not come from a philanthropic culture or tradition. When it comes to permanent recognition, named funds are the primary way to recognise donors to an endowment. By including their names on a fund, donors and their loved ones are more likely to give additional gifts over their lives to honour and recognise special milestones, such as birthdays or anniversaries.
8. Adopt the board policies you will need to support endowment fundraising, and review them regularly.The essential policies include:
• Gift acceptance policy: What kinds of gifts will you accept, from whom and for what purposes? How will unrestricted bequests be used?
• Investment policy: How much corpus will you have
before the school begins spending endowment income? What percentage of a pledge should be paid before spending income?
• Spending policy: How much of the earnings will you spend each year? How much of the earnings will be reinvested?
9. Be mindful that not every donor is a prospect for an endowment gift.In your finite donor community, those loyal donors with significant assets and a sophisticated approach to philanthropy will likely be those to whom you turn for endowment investments. Encourage current parents and grandparents who will be with you for a while and are interested in endowment to continue their annual support in addition to investing in the school’s future. For parents or grandparents for whom graduation of their youngest or only child is on the horizon, consider asking them to make an “ultimate gift” that will endow the major support they’ve provided the school on an annual basis, to create a named fund, or to contribute to a pooled endowment fund.
10. Draw on your networks to share experiences and resources on your path to building or growing your endowment. If you have yet to start an endowment, reach out to other schools who already have one and ask about their experiences – both successes and challenges. Every head of school or trustee was an “endowment novice” at one time!
1. See: http://www.campbellcompany.com/news/bid/101658/Collins-Group-Joins- Forces-with-Campbell-Company.
2. “Stretch” gifts are gifts seemingly out of proportion to a donor’s resources that require him or her to make sacrifices or live more modestly than the donor’s income ordinarily would allow. (Source: http://philanthropynews digest.org/news/so-called-stretch-gifts-growing-in-popularity.)
3. For the first time in the history of King’s Academy, located in Jordan, the parents of the Class of 2016 reached 100% participation in the Senior Parent Gift – an exciting milestone for the school community. The Senior Parent Gift raised almost US$300 000 for financial aid through the generosity of 133 families. (Source: http://www.kingsacademy.edu.jo/newsevents/ school-news/news-archive/2016-05/senior-parent-gift-achieves-100- percent-participation-financial-aid.)
Category: Spring 2016