Passion Boosting New Major Gifts
July 25, 2017 Andy Segedin
The development staff members at the University of Oregon cast their lines for bigger fish at the start of the university’s current fundraising campaign which began in 2010. For the university’s previous campaign, the development staff had set out to raise $600 million and wound up with more than $850 million.
With a new campaign goal of $2 billion, university practices were adjusted, including an effort to set sights higher by increasing the major gift threshold to $100,000 and up, quadruple the previous mark.
“It was something happening in the industry,” Paul Elstone, senior associate vice president for development, said of the increase. “You can spend just as much time and energy on a gift regardless of the size.” That focus on upping the major gift mark and turning gifts between $25,000 and $99,999 into mid-level gifts has worked well thus far, Elstone said. The campaign has raised more than $1.6 billion and is expected to run for another 18 months or so.
An emphasis on larger-dollar gifts is part of a national trend, Elstone said. The university’s development team is still exploring new ways of promoting giving, including giving days and crowdfunding. But, maintaining a flat number of donors represents a win nowadays, he said. The classic 80-20 pyramid in which 80 percent of the fundraised dollars come from 20 percent of donors has grown steeper.
The university made headlines in 2016 with a particularly large gift — $500 million from Nike co-founder Phil Knight for a new campus. Excluding the Knight gift, 2,432 donors, 2.87 percent of the campaign’s total, have given $1.14 billion, about 93 percent of the non-Knight total. The remaining 83,069 donors have donated $85.19 million. Elstone stressed that those giving more modest sums remain very valuable as they create a broad constituency of support, provide gifts with fewer restrictions, and might someday themselves become larger donors.
There was a small number of individuals who, after the announcement of the Knight gift, questioned the university’s need for their support. Major gifts tend to be designated to specific purposes. Even after Knight’s gift, there remained unfunded objectives from various colleges within the university, Elstone stressed.
Finding what prospective major-gift donors are passionate about and how those passions might relate to university projects is built on relationships, according to Elstone. Some of this relationship building and information gathering occurs at special events and donor prospects’ participation in university task forces and advisory groups. For the most part, however, sending development officers into the field is the best way to learn about supporters’ interests, said Elstone, describing major gifts as a “field-based, visit-driven program.”
Most development officers are located at the university’s Eugene, Ore., campus while others are located in Portland, Ore., Bend, Ore., and Albuquerque, N.M. A small number of regional offices, particularly on the west coast and in the northeast, are also operated. Development officers not assigned to a specific college tend to travel to areas such as southern California about twice per month.
The importance of relationship building has led the university to prioritize hiring and retaining the best major gifts officers available. This includes a director of talent management recruiting such individuals and continued training and professional development once they are onboard.
“We need people who are not afraid to pick up the phone and reach out,” Elstone said. “You’re going to get a lot of noes, but they can’t be afraid to do that. We’re also looking for collaboration between colleges. We want a business school officer who might be able to help the music school by making that connection… Also people who understand data and segmentation, getting in front of the right people. It comes down to spending your time with the right people. That’s really an important skill.”
The average major-gifts officer tends to stay in one position for only two to two-and-a-half years, Elstone said, making turnover a big focus for the university. The university has also worked on engaging academic leaders and training deans around development. Major-gift donors tend to want to hear a university president or dean’s vision before committing to a large gift, he said.
Elstone does not believe that the giving pyramid will shift toward 99-1 or that the university will again increase the major-gifts threshold beyond $100,000. Still, attention is being paid to building a pipeline of future major-gift donors and more modest donors by focusing on building relationships between the university and young alumni that can be maintained for a lifetime, he said.
An increased focus and reliance on major gifts is not unique to the University of Oregon. Factors such as income disparity among potential donors and organizations’ struggles to retain donor bases have led to a national trend toward increased emphases on major gifts.
“We are seeing institutions, I think, focus a little more attention than they had recently on the types of big, visionary opportunities that might appeal to major donors,” said David Bass, senior director of research for the Council for Advancement and Support of Education (CASE).
Bass pointed to the 2016 Voluntary Support of Education study, conducted by the Council for Aid to Education (CAE), as evidence for higher education’s reliance on major gifts. It showed an institution’s 12 largest gifts, on average, account for 30 percent of total voluntary support. Mature fundraising programs have responded by developing deep relationships with prospective donors conducive to major gifts. In addition to cultivating long-term relationships and trust, institutions have had staffs collaborate across colleges and departments to identify transformative projects such as curing cancer or alternative energy sources that would appeal to major donors’ big-picture goals, Bass said.
Higher educations’ dependence on major gifts is deep-rooted and the growing concentration of wealth toward a relative few is likely to continue to drive focuses in that direction, according to Bass. Recognition of the importance of a handful of major donors should continue to affect giving periods, such as identifying lead donors during the silent periods of campaigns. Leadership also has to balance providing necessary resources to major gifts with building a broad base of support. One of the best predictors of a major gift tends to be a previous one.
The trend toward major gifts is broader than just higher education. Aggie Sweeney, CFRE, senior counsel at Collins Group, a division of Campbell & Company, and chair of the Giving USA Foundation, said that recent data shows that organizations are raising more and more dollars with fewer donors. Sweeney cited a recent Association of Fundraising Professionals (AFP) Fundraising Effectiveness Survey that pegged the number of donors lost for every 100 gained at 99.
Similarly, Blackbaud’s donorCentrics Index of Direct Market Fundraising showed that from 2011 through 2016 nonprofit revenue increased by a median of 4.7 percent while the number of donors decreased by a median percentage of 7.5.
The result is that large gifts are becoming larger and, anecdotally, the percentage of total giving via large gifts is increasing, Sweeney said, citing the organizations with which her firm works. Sweeney said that income disparity in America is likely to keep a reliance on major gifts going. Economic indicators do not portend change in how wealth is distributed and current tax proposals might further accelerate the divide between the haves and have nots, she said.
In response, organizations are pushing to expand development staffs to foster relationships with donors as opposed to focusing on online and direct-mail appeals. Programs such as direct mail, efficient today with the level of data available, are receiving less investment in favor of relationship-building effort such as peer-to-peer initiatives. Organizations are also approaching special events more strategically in an effort to create touch-points for prospective donors.
“Many nonprofits are looking at raising more money. Major gifts is a more efficient and effective strategy for them than looking to greatly expand donor bases year to year,” said Sweeney.
How organizations go about that strategy varies from place to place. Universities with alumni spread across the country are investing more in placing development staff where alumni are both with satellite offices, which tend to be home offices, and increased travel.
Organizations are also placing prospective donors on the road to engage around the organization’s mission. A public radio station dedicated to classical music, for instance, might have prospective donors tour performances in Europe with an organization representative as a guide. Generally, such trips are paid for by the prospects, though sometimes the organization will foot the bill if the trip is related to a specific ask, Sweeney said.
Donor recognition has been one emphasis Rotary International has made with respect to its major gifts program, according to Eric Schmelling, general manager and chief philanthropic officer. Rotary International tiers major giving starting at $10,000, topped by the Arch Klumph Society, named after the former Rotary president, for those who have given $250,000 or more during their lifetimes. Recognition for society members include pendants, pins, and the opportunity to have the donor’s portrait placed in the Arch Klumph Society Gallery at Rotary International World Headquarters in Evanston, Ill.
Society members have traditionally been inducted at world headquarters, according to Schmelling, but this year a new model has been introduced to honor members as regional events closer to them in an effort to honor individuals according to their own preferences. Additional overall efforts to add a more personal touch to giving have included increased stewardship and reporting and a virtual reality video, set to provide perspective on the organization’s mission, that was unveiled at Rotary’s international conference in June.
The foundation for Rotary’s major gifts program was established during the 1980s and 1990s with incremental investments made over the years. Such investments include the allocation of dollars toward targeted mailings and additional staff focused on the organization’s endowment fund and legacy giving, according to Schmelling. Rotary has seen steady increases in the number of major gifts year to year and is on a greater pace this year thanks, in part, to the organization’s centennial campaign.
Rotary received 1,128 major gifts during its 2015-2016 fiscal year, up from 1,057 in 2014-2015, some 985 in 2013-2014, and 861 in 2012-2013. The $37.6 million (not factoring in a matching donation by the Bill & Melinda Gates Foundation) dropped off from the $54.8 million collected in 2014-2015 and $42.2 million in 2013-2014, but beat 2012-2013’s mark of $34.5 million.
Through April 30, with two months remaining in its fiscal year, Rotary had received 1,171 major gifts totaling $50.1 million. Totals stood at 830 and $26.4 million during the same point in 2015-2016. The largest increase in major gifts had thus far come from realized estate, which accounted for 62 gifts and $3.7 million in 2015-2016, but had increased to 92 gifts and $13.6 million 10 months into 2016-2017.
Broadly, Rotary has turned to its membership of 1.2 million and asked the group to think of the organization’s foundation as a preferred charitable option. At the same time, many members are reaching the points in their lives in which they are considering estate plans and legacies, Schmelling said.
Rotary has sought to establish a pipeline with younger and middle-aged supporters in a number of ways including the development of a new online giving system that should be available later this year. Organizational leaders have also sought to establish concrete, actionable objectives that younger, more cause-focused donors might gravitate toward.
In addition to its well-known work in eradicating polio, Rotary has highlighted its own work in areas including water and sanitation, basic education and literacy, and community and economic development.
“Members used to give to Rotary because of the culture and trust in the organization,” Schmelling said. “As we see shifts in different generations, more people are looking for specific purposes whether it be polio or another strategic priority.”
Finding a hook between organizational goals and donor interests is also a focus of World Vision’s major-gifts program, according to Chris Glynn, senior vice president, transformational engagement. Large gifts tend to come from cultivation of existing donors and, for World Vision, many such gifts come from those who started off as child sponsors. Such donors might be unaware of World Vision’s other program areas such as clean water, economic development, and education, Glynn said.
“As we continue to have conversations with donors, you discern where their passions lie and match project work in the field,” he said. “That’s where the magic happens.”
World Vision categorizes major gifts as those of high-net worth, $25,000 and up. The organization launched the For Every Child campaign in 2010, surpassing its $500 million goal in 2015. World Vision has nearly doubled its annual major-gifts revenue since the campaign’s launch. World Vision raised $79.7 million from major gifts in 2016, up from $46.2 million in 2010.
Glynn expects major gifts to become increasingly important, with growth rates among high net worth donors greater than other donor segments. As Baby Boomers begin to retire and pass wealth onto their heirs, it is for World Vision to capitalize by illustrating the social and tax benefits of donating those dollars to the organization.
In the midst of the quiet phase of its latest campaign effort, World Vision leaders do not expect fundamental changes in major gifts fundraising but are looking for better ways to understand it. A donor journey, simulating how the typical major donor interacts with the organization, has been mapped out. From there, the priority has been to discern the kind of impact such donors would like to make, create moments for the donors to reflect on that impact, and creating a community of donors seeking to achieve their goals — donors tending to feed off of other donors.
If such targeted approaches to major-gifts fundraising seem foreign, there is no reason to be alarmed. It is possible to haul in significant gifts without special attention paid to such programs. Silicon Valley Community Foundation, headquartered in Mountain View, Calif., has received large gifts such as the reported $100 million given last year by Netflix founder and CEO Reed Hastings. It has done so without any major-gifts officers, according to Mari Ellen Reynolds Loijens, chief business, development and brand officer.
In her periphery, Loijens has noted a general shift in the sector toward focusing on major gifts, but has stood pat with what she describes as a “donor-centric” approach that does not differentiate donors by their giving capacity. In describing her approach, Loijens referenced her own recent gift of a few hundred dollars to an arts organization and how it would be hurtful to her as a donor if her gift didn’t mean as much to the organization as it did to her. A similar mindset underlies the foundation’s strategy.
Loijens brought the donor-centric approach with her to the job 13 years ago when the foundation held $400 million in assets. Today, the foundation holds $8.2 billion in assets and raised $1.4 billion in 2016 despite a fundraising team of just a dozen.
“I truly believe that if you give the $25 donor the attention, love, respect, and awe that you give a $25 million donor, it will always lead to fundraising success,” Loijens said. “I really think you’re making certain assumptions thinking a $100 donor can’t be a $100,000 donor. I treat every donor like they have the potential to be the biggest donor.”
Pressed for how this approach works in practice, Loijens declined to share the “secret sauce.” Still, she offered that the foundation’s value system and culture does leave an impression on donors. Each time she meets with a major-gift donor, Loijens is asked why she’s sitting at the table with them. An overall passion for philanthropy and change comes through, she said.
Loijens likened nonprofits to a small business seeking investment on the television show Shark Tank. If an investor offers the business owner $1 million, but demands that to receive the money all widgets the company makes must be pink, the business owner is faced with a choice. Similarly, a nonprofit has a choice to accept a large donation or not and to accept conditions associated with that donation or not. Further, like guests on the show, nonprofits have the choice to partner with investors who have the passion and experience to take initiatives to the next level. The latter appeals more to Loijens than the former.
“With [Dallas Mavericks’ owner and Shark Tank investor] Mark Cuban, you aren’t just getting $100,000, you’re getting Mark Cuban,” Loijens said. “I don’t see why nonprofits don’t see the value in that. A lot of people want major gifts because the want the dollar signs and the zeroes. They don’t want the investor. Here, we want the investor. If I think a $25 investor is going to help the homeless, I have more than $25. I have you.”