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Directed Giving
Directed Giving

Donors want options. We need unrestricted gifts. Here’s how to create the win-win.

By Herbert Soles


Early in my career as an independent school development officer, I visited a generous donor to seek a major gift for an annual giving challenge. The prospect was an accomplished business leader who owned several prosperous companies. I was the right person to make the proposal. Before becoming a development officer, I was a high school history teacher and the coach of the football and wrestling teams; my prospect's son was my former student and player, plus this donor and I were good friends.

The scene was set for success. Or so I thought.

I made a compelling presentation about how tuition doesn't cover the full cost of education and the need for unrestricted giving to cover budget shortfalls. An uncomfortable silence covered the room. The prospect's face turned red, never a good sign. He finally blurted, "My answer is no. And don't ever ask me to support your annual giving program. I have heard the pitch from others before you, and I just don't buy the concept."

He slammed his hand on the top of his desk. "How would you respond if I sold you a house and then asked you to give additional money to make up the difference in my poorly calculated profit margin? It's just bad business. I love the school, and the athletic program has done wonders for my son. Now, when you get a specific project, come back to see me."

My friend's giving philosophy illustrates the problems that independent schools—as well as colleges and universities—face in securing unrestricted annual gifts: Our case for annual giving is not compelling, and donors want choices.

We can do better on both fronts and achieve our goal of raising unrestricted gifts through what I call directed giving. That allows donors to funnel their gifts to broad budget-funding categories but not confine their contributions to specific areas. Directed giving helps educate donors about what we achieve with the annual fund while satisfying both their desire to allocate their gifts and our need for flexible donations.

Drop the gap speech

Donors typically have three basic questions: Where does my gift go? How will it make a difference? Why does the school deserve my support?

Too often independent schools reply to donors' questions by explaining that annual giving is essential to the budget. "It fills the gap between tuition revenue and the real cost of education," we say.

Now that's an exciting cause.

That staid, but unfortunately popular gap message bores or even angers prospective donors. When I ask annual giving prospects how they feel about helping with the gap, the response is usually tepid. The more outspoken will say, "No one helps with my gap. I am required to pay my bills. Why don't you budget better?"

The budget shortfall message reinforces the mistaken belief that the unrestricted annual fund is a black hole down which donors' hard earned money is lost, remitting no discernible benefit in return. In higher education, the equivalent lackluster annual fund appeal might note the importance of alumni participation or giving back, even as more alumni see their relationship with their alma mater as transactional.

A more stimulating explanation is that annual giving helps the school provide an education above and beyond what tuition buys. This is the message we should convey: Annual gifts are the difference between a good education and a great one. Your donation funds professional development opportunities for teachers and enables students to participate in study abroad programs, ensuring that we're producing global citizens.

Isn't the message that "annual giving ensures the best education" more inspiring than "it makes up for shortfalls"?

Create a family of funds

In her book Donor-Centered Fundraising, nonprofit fundraising researcher Penelope Burk notes that a key factor in donor retention is our assurance to donors that their gifts are used in the manner they specified. I've tested that theory over the years with focus groups of parents. When I ask, "What would it take to get you to make a larger gift?" the most common response is, "I would give more if I knew where my gift was going and that it would make an impact."

Give donors a choice and tell them how their gifts will be used, but structure your annual giving appeal to provide the flexibility of unrestricted dollars. The best way to do that: Create a family of funds to which donors can direct their giving.

Jay Goulart, the former director of development at Proctor Academy in New Hampshire, developed the concept of an annual giving family of funds, which allows donors to direct gifts to areas of personal interest while supporting essential elements of the school. I successfully introduced the program to Saint Andrew's School in Florida and Norfolk Academy in Virginia. Many other independent schools, and several higher education institutions such as the University of Notre Dame in Indiana, have incorporated this strategy into their fundraising efforts.

How does a family of funds work? Donors can choose from a selection of funds representing broad groupings of line items already within the approved school budget. The most popular are financial aid, fine arts, athletics, and faculty development, but the family of funds might also include special initiatives, such as technological innovations or international programs.

Institutions often offer more specialty funds to define their culture and mission. At Norfolk Academy, public service and leadership are important, so every year we invite donors to support the community service work our students perform and the fund that allows Norfolk, Va., public middle school students to attend a free summer program at the academy. When donors read about the programs that annual fund gifts support, they understand the type of school we are. The descriptions communicate that mission.

To avoid a fund exceeding its budgeted limit, make sure your predetermined budget items are comprehensive. Fine arts is broad enough, so we don't worry about getting too many gifts for set design and costumes and too few to bring in visiting artists. Remember, all funds support line items already approved and defined within the current budget. They are not additions to the budget.

The most frequently asked question from schools considering this program for the first time is, "What happens if one of the funds receives more gift money than the budget allocates?" The best way to avoid that is to include a fund for area of greatest need and inform donors of the possibility that their gifts might support other parts of the mission.

Every annual fund appeal we send out includes this provision: The annual giving family of funds supports the faculty and students through the school's operating budget. Should directed contributions exceed a fund's budgeted limit, the school's administration reserves the option to direct the use of such contributions to the area of greatest need.

An interesting phenomenon occurs when prospects decide which funds to support. Donors appreciate the opportunity to make a statement with their gift, yet the most widely selected fund is the area of greatest need. Donors are essentially making an unrestricted gift, which is the fundraiser's initial goal. I believe this is a result of prospects taking the time to consider the many ways the annual giving family of funds is helpful and finally having the epiphany that all the choices have value.

Directed giving reframes the ask from "Will you give?" to reinforcing the positive assumption of "How would you like to make your gift?"

Mission giving raises revenue

At the institutions where I've instituted the family of funds, annual giving revenue has gone up. By simply describing to donors how their gifts further our mission, phonathon callers make a more compelling case for support.

"I love the family of funds," one Norfolk Academy phonathon volunteer says. "Whenever people hesitate or say no [to unrestricted annual giving], I ask them if they realize they can direct their gift. They always want to hear more."

Another volunteer fundraiser asks prospects what they like best about the school. After carefully listening and finding their interests, she plugs the family of funds: "Do you know you can direct your annual gift to that particular area of the budget?" Asking donors to give to mission-supporting funds of their choice is not a hard sell.

A family of funds also helps with major donor prospect research, adds Paula Schwartz, a senior consultant with Independent School Management in Wilmington, Del. "It provides an in-house method of identifying the affinity of a prospect," she says. "Keep good records, and the next time you have a specific capital project, you will know which past supporters are most likely to be interested. You will have a self-identified prospect pool."

Among other benefits, directed giving empowers donors with choice. You give them the chance to act on their values and invest in your institution's mission. Donors no longer consider themselves investors who are sinking money down a black hole; they feel more engaged with the school's mission.

About the Author Herbert Soles

Herbert Soles is the assistant headmaster for development at Norfolk Academy in Virginia.




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