The Deep Mystical Secrets of Attracting Endowments
- By Janet Coburn
- January 1st, 2002
Fundraising may help cover the day-to-day expenses of running an institution of higher learning, but endowments provide the foundation it’s built on. With sufficient endowments in place, a college or university is better prepared to weather the changes in economic climate that inevitably come.
But how does a school attract endowments? Does it take a specially trained development staff or a financial “angel” to get the ball rolling? Surprisingly, no. You’re probably already doing what you need to do to attract both small and large endowments. Here’s some advice from people who’ve succeeded.
Endowments: The Basics
First, let’s quickly review how endowments work. An endowment is, literally, a gift that keeps on giving. Endowment money is earmarked for a special purpose and set aside for that purpose -- forever. The principal is invested, and the income from the investment generates funds that are used to support the earmarked goal. The principal is never touched and continues to generate income throughout the passing years.
Actually, that’s not the whole story. Harvard University, an institution that should know about endowments if anyone does, applies a slightly different philosophy. Andrew Tiedemann, communications director for Alumni Affairs and Development at Harvard, explains. “Endowments are meant to enable stable, long-term support for programs and people,” he says, “to help an institution maintain its independence and be protected from economic up- and down-swings.”
Unlike some universities, which use the interest income from endowments directly to fund programs, Tiedemann says Harvard actually withdraws five percent of the endowment’s principal each year to provide funds for the chair, professorship or other purpose. Any income generated by the rest of the endowment money is then returned to the endowment fund. This eliminates the problem of trying to guess how much interest an endowment will generate in any given year and lets the department know how much money to expect. Of course, in lean years, the endowment can actually shrink but, for the long term, the system works to keep funding stable.
Another tactic that some institutions use is the “quasi-endowment.” A true endowment is set aside in perpetuity, usually for a purpose the donor specifies. A university, however, can take some of its nonrestricted funds and treat them like an endowment, investing the principal and generating income for a purpose. The difference is that, legally, the university can change its mind and take funds out of a quasi-endowment if it needs to. A true endowment cannot be altered that way.
The Personal Touch
It should be noted that endowments need not be Harvard-sized chunks of millions of dollars. It’s possible to start smaller. According to John T. Landry, director of development, endowments at the University of Louisiana can start with a minimum investment of $10,000, which generates a modest-but-useful $500 scholarship. For larger endowments, donors can increase their gift value thanks to matching funds from a Louisiana state trust fund or the Board of Regents Support Fund. An investment of $600,000, will be matched with an additional $400,000 to create an endowed chair. Louisiana now boasts 150 endowed professorships, 15 chairs and a couple of “super-chairs,” endowed at $2 million each.
Endowed professorships and chairs are especially useful for attracting and retaining eminent scholars and good faculty, Landry notes, but endowments can fund other areas of the school as well. “It depends on what the donor wants,” he says. “The endowment could support the school’s band, or even a position on the football team. You could have all 22 positions on a team endowed by different donors.”
Landry adds, “Its very easy to sell donors on the idea of endowments because of the permanency.” He also notes that the leverage provided by matching funds makes endowments more attractive to donors.
Landry says the secret of attracting endowments is simple -- ask for them. A personalized approach, he finds, is most effective. His department embellishes a generic pamphlet with the names of the prospective donors -- giving them all the details of funding, say, the “Mr. and Mrs. John Jones Professorship in Engineering.” The information packet contains all the usual data on the university, plus the personalized proposal. “Take my word for it,” Landry says. “It’s effective. It shows you mean business. If you do a little more than your competition, you’ll stand out.”
Another critical factor, Landry notes, is stewardship. “After you receive a gift in perpetuity,” he says, “treat the donor with respect in perpetuity.” A one-time thank-you is not sufficient; annual invitations to donor recognition programs are called for.
People to People
Curtis R. Simic, president of the Indiana University Foundation, also knows the value of endowments and the means to attract them. A recent campaign to benefit the Bloomington campus, for example, grew the number of endowments from 100 to 330. A six-year campaign raised a total of $1.1 billion, $600 million of it in endowments.
Simic’s secret? Good, old-fashioned public relations. “Use all the communications vehicles you can,” he advises. Simic’s department developed brochures, encouraged the university’s president to speak frequently about endowment opportunities, and got the word out to students, families and alumni through a variety of campus publications. “Once we got a few endowments,” he notes, “the ball got rolling.” He also touts the effectiveness of challenge grants: “Early or single donors will give if matching funds are available,” he says.
According to Simic, the “people-to-people” approach works best for attracting donors. “Get the student who receives the scholarship or the professor in front of the gift donor to say how much it has meant and what’s being done with it,” he recommends. “We bring all the elements together. Then the donor can see dollar signs turned into a person. With testimonials, you’ve got more than just figures on a page; you can generate excitement.”
That kind of excitement can work for your institution, too. With a little effort, thorough preparation and good follow-through, you too can see the number and quality of long-term investments in your university’s future grow.
Janet Coburn is a Dayton, Ohio-based writer with experience in higher education issues.