Trends and Best Practices in University Foundations

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Known as Institutionally Related Foundations (IRFs), affiliated university foundations currently are formed and charged in various organizational and governance structures ranging from those focused only on endowment and resource investment to an evolving high-level integration with their university partners. Under all models, IRFs strive to secure predictable resources. As state legislatures decrease or hold the line on funding, public universities are more dependent on private philanthropic support and new revenue streams to accomplish institutional strategic priorities. This means that IRFs will continue to assume greater importance, and their aligned partnerships with university executives, development and alumni offices (if separate) and institutional academic and administrative leadership are crucial. Greater levels of integration, solid connectivity, streamlined systems and processes and new thinking across multiple functions are signs of such changing advancement partnerships.

Many university presidents are asking their foundation boards to increase their engagement in a set of university opportunities such as advocacy with public policymakers, marketing, public-private partnerships, fundraising and, in some instances, academic program review. A new paradigm may well be in order for foundation priorities – expanding to funding the institution’s operations and participating in joint planning initiatives.

As foundations transition into broader responsibilities and as institutions consolidate resources, it is not unusual to have a foundation CEO also serving as the Vice President for Advancement and overseeing fundraising, alumni relations and communications and marketing for the university.

This heightened level of engagement with institutional stakeholders demonstrates that honorific boards are becoming  a thing of the past and, at the same time, is bringing new focus on accountability and assessment within the foundation board and in relations with partners, according to the Association of Governing Boards (AGB).

Fundraising has become a more active role for many IRFs – along with traditional asset management. More than two-thirds of foundations at public universities now are fully responsible for institutional fundraising – in effect, they are becoming the advancement office. Campus CEOs and development officers recognize that the alumni body represents the greatest potential for giving and affiliated foundations are a proven way to involve and solicit that constituency. The Council for Advancement and Support of Education (CASE) reported in May 2019 that alumni giving increased 7 percent over the previous year, due in part to massive campaigns and improved engagement software that keeps more alumni within reach in the ways they want to be reached. IRFs are increasingly providing competitive advantage in the form of scholarships, endowed chairs and transformative programs and infrastructure.

While the latest five-year public funding trend by state legislatures is improving somewhat since the drastic decreases of the initial post-recession years, gains have not been dramatic an in most states have often simply held the line. For example, in New Mexico, state fiscal support for higher education totaled $856.2 million in FY14 and hit a low of $836.2 million in FY18; in FY19 funding was up a modest 2.4% to $855.9 – reflecting a 5-year change of 0.0%.

Other Expanded Roles

IRFs are also increasingly sought to engage in other activities in support of their host institutions, including trust management, bond issuance, Enterprise Risk Management, and real estate development. As the resource and asset management become broader and more complicated tasks, some institutions are outsourcing the Chief Investment Officer position. As 501(c)3 organizations, foundations are also independent of certain limiting state mandates and policies that universities may face and thus have more flexibility for raising and managing resources on behalf of the institution.

Enrollment trends are causing many institutions to consider changes in their educational and business models to attract and retain new generations of students and deploy modern technologies both to meet consumer expectations and stay competitive in learning practices, marketing and differentiation, business systems and customer relationship management.

Foundations and advancement offices are investing in predictive analytics (Artificial Intelligence)) to capture and analyze data to determine individual predispositions, learn from behavior patterns and act on insights to better personalize connections with  customers and constituents – cloud-based solutions and software like Salesforce and EverTrue that make constituent interactions smarter, faster and more personalized.

New positions are emerging in the fundraising office, such as the digital gift officer who relates to major donors online through their tactics such as email, social media and video. This new breed of fundraiser repurposes and customizes these engagements to connect with donors across all generations, capturing new donors early and building relationships with existing donors through the tools these donors use every day.

For some institutions this evolving and broadening role has been more complicated than expected: one of the greatest challenges is developing a strong board of volunteer leaders who are focused on fundraising, engagement and other aspects of the advancement enterprise, unlike the other governance issues that university trustees face. Clarity and careful communication about expected roles are musts, particularly between the boards of the university and the foundation. In fact, according to the AGB, as IRFs play a larger role in securing institutional success, clarity around purpose, roles and responsibilities are a must to avoid confusion among campus CEOs, foundation CEOs and their respective boards.

Foundation channels for alignment and partnerships with campuses include the foundation’s mission statement, strategic or long-range plan, working agreement with the university, coordination on board recruitment and the ability to manage relationships with the institution’s prestigious alumni and friends.

Topics on the minds of university foundation CEOs at the CASE IRF conference this year included:

  • Increased outsourcing of investment functions
  • Declining enrollments versus the increased need for scholarships to attract more students (linked closely to enrollment management and changing regional demographics)
  • Reserve policies
  • Changing reporting relationships for gift officers (and dotted line relationships), requiring strong relationships between the foundation and the university to avoid misalignment; stronger relationships and integration with alumni affairs offices
  • The reality of “institutional gifts” coming in directly to the university as opposed to through the foundation
  • Student-managed investment funds
  • Increased use of donor advised funds, altering how some endowments are structured.

Best Practices in IRFs

1)            Increasing complexities and changes in funding for higher education create new opportunities for foundations, not only in securing and stewarding private support, but also as key “conveners” in developing institutional partnerships critical also to enterprise solutions for the institution. This evolution has led to more sophisticated processes within foundations.

2)            Bringing business sector experience from the corporate executive suite and boards in many cases, IRF boards are now expecting their foundations to be more business-like in their practices. Elements include diversified investment strategies, strategic planning and multi-year budgeting through scenario planning and forecasting and Responsibility Centered Management (RCM).

3)            As with other types of nonprofit boards, best practices for foundation boards emphasize smaller, strategically engaged boards with meaningful roles for volunteers who are aligned with organizational goals and objectives.

4)            Foundations create value by producing results and outperforming expectations; campaigns are key success indicators and bring much-needed resources to the institution. Delivering a successful campaign permits foundations to influence overall university objectives, such as serving as a venue that drives successful collaborations.

5)            As institutional value increases, the case for investment in the foundation by the university also becomes stronger. It’s important for foundation leadership to think about their organizations as investment opportunities driven by this value created. Positioning foundations by strategic messaging and branding also are important tools in this process.

6)            Results and success are achieved through a high-performing executive team. This team, in turn, drives a high-performing organization by deploying a set of strategies and programs that predictably generate high-level outcomes through talent management, efficient operations and ROI budgeting. Planning is one of the key methods of aligning university and foundation strategic goals, operations and collaboration.

7)            Dashboards are used more actively to provide a snapshot of success and ROI against all goals – whether fundraising, board and staff development or university partnerships and collaborations. Details that support these dashboards can be updated annually or more frequently to further support the case for investment.

 

 

 

 

Sources:

Association of Governing Boards

Chronicle of Philanthropy

Napa Research

SEI Investments Management Corporation