Financing the Future

What’s the best way to ensure the continued viability of your athletic program? The answer is endowments, an idea that requires both discipline and creativity.

By Kenny Berkowitz

Kenny Berkowitz is an Assistant Editor at Athletic Management.

Athletic Management, 15.3, April/May 2003, http://www.momentummedia.com/articles/am/am1503/financing.htm

From the “Anne G. Broussard Spirit Award for Courage, Loyalty and Enthusiasm” at the University of Texas, to the “Ed Woolard Shooting Guard Scholarship” at North Carolina State, to the “1955 Gator Bowl Team Scholarship” at Vanderbilt University, endowments have become a must for large college athletic departments. They are being used to pay for student scholarships, coaching salaries, staff incentives, travel expenses, recruiting budgets, and daily operations. And they are ensuring financial stability for the future.

“Endowments are the future of collegiate athletics,” says Chris Wyrick, Assistant Athletic Director/Director of Major Gifts at Vanderbilt University. “Any athletic department that isn’t setting up an endowment is going to be far poorer 10 years from now than it is today.”

The biggest challenge with an endowment, however, is starting one. Athletic fund-raisers have to bank millions of dollars before their endowment starts to make an impact. And that can take a lot of patience, especially when the economy is sluggish.

“The numbers are daunting,” admits John Kates, Director of Major Gifts at Stanford University. “But obviously, if we can’t attract the best student-athletes from all around the country, we’re not going to be able to compete at the level we want. So our highest priority right now is to raise money for endowed scholarships.”

“The beautiful thing about endowments is that they provide a stable source of income, and when you get into tough economic times, that’s a real comfort,” says David Onion, Director of Development for the University of Texas’ Longhorn Foundation. “But getting to the point where you’re making a commitment to start endowing funds can be very challenging.”

Starting Endowments
Creating endowment funds is definitely a long, long-term project, and it starts with making sure everyone in the athletic department is on board. “When you’re starting an endowment program, the first audience you need to sell to is the administration,” says Onion. “In today’s environment, with the focus on quick fixes and instant impact, it’s important to promote long-range solutions.”

“The challenge is keeping coaches and administrators focused on the future,” says Chris Retrievi, Associate Athletic Director and Director of Development for Intercollegiate Athletics at Michigan State University. “It takes foresight to realize that once you have that endowment, the scholarship is yours forever. And it takes discipline to ask people to support that need, knowing full well that it would be nice to have the quarter of a million to spend right now.”

“In order for endowments to work, you have got to see the forest for the trees, and you have to have discipline,” says Wyrick. “The only way you’re going to get through difficult times is by having a core of funds to fall back on. And that takes vision.”

Once you have the vision, a successful endowment drive begins by setting a reasonable goal. This entails a balancing act: You need to start small, but you need big enough numbers to make a difference. At Michigan State, administrators created their endowment with unrestricted funds raised in their annual campaigns. After balancing the budget, they put any money left over into the athletic endowment. Three years later, their endowment has reached $13 million.

Other schools start by calculating the amount of money it will take to fully endow a certain line item, basing their giving levels on those expenses. For example, at Stanford, says Kates, a fully endowed scholarship starts at $750,000, because the annual cost of tuition, room, and board add up to $35,000, and endowed money has about a five percent income rate. At the University of Texas, a fully endowed scholarship starts at $350,000, which provides enough income to pay for tuition, room, board, student fees, academic support and other services.

However, in these tough economic times, many suggest setting a goal that simply feels reasonable. At Virginia Tech, Director of Development for Intercollegiate Athletics Lu Merritt hopes to grow the overall endowment by $2.5 million every year. At North Carolina State, the Wolfpack Club is striving to add $2 million to its endowments each year. At Vanderbilt, administrators have set a goal of raising $15 million in endowments over the next five years, and have already raised $9 million toward the total.

“You have to start small,” advises Wyrick. “If you go out and blow your donors out of the water by starting your endowments at $100,000, you’re not going to get many takers. You need to start realistically, and increase it incrementally.”

Selling Endowments
The basics of cultivating donors for an endowment fund are not terribly different than working on any large-scale fund-raising effort. You need to promote the project, identify prospects, and develop relationships. But there is a difference in motivational factors to be aware of.

“The motivation for an annual gift is quite different from the motivation for an endowment gift,” says Onion. “In the annual program, there’s more of a perk-driven system, where the donors are motivated by seating priority, or by parking. The motivation for endowment gifts is much more philanthropic. It comes from people who are looking to impact the program. In major gift fund-raising, success is really built through one-on-one interaction with the donor.”

“The people who are interested in giving to the endowment tend to be purely philanthropic,” agrees Emily Barbour, former Associate Director of North Carolina State’s Wolfpack Club and currently a senior consultant at Hartsook Companies, based in Wichita, Kan. “They like the idea that, by giving a scholarship, their family name will continue in perpetuity. It brings them closer to the student-athlete, and makes them feel they are really investing in the program.”

“Being able to name your scholarship is definitely a big plus,” agrees Wyrick, who helped create the Ed Woolard Shooting Guard Scholarship when he was a fund-raiser at N.C. State. “When you’re trying to market something, you have to offer people different levels of giving, where the next level offers just a little bit more. So the ‘Ed Woolard Scholarship’ would probably cost $100,000. At the next level, if you gave $250,000, you could have the ‘Ed Woolard Men’s Basketball Scholarship.’ At $500,000 to $1,000,000 you could actually choose the position on the team, so you’d have the ‘Ed Woolard Shooting Guard Scholarship.’ And every year, that two-guard will have your name.”

Therefore, some of the most successful endowment programs are built on allowing the donor to provide funds to exactly what he or she is interested in. From endowing the quarterback’s scholarship on the football team to endowing the softball team’s spring trip to Florida, this is where the creativity comes in.

At Vanderbilt, there’s a donor who’s named a scholarship in memory of his high school football coach, and a pair of donors who’ve given their father an endowment for his 75th birthday. There are also endowments that give coaches the opportunity to reward particular players: At N.C. State, there’s the “Ironwolf Scholarship” for the hardest-working player on the football team, and at the University of Texas, there’s the “Anne Haskins Grousbeck Scholarship for Academic Accomplishment and Leadership, Team Spirit and Excellence in Women’s Tennis,” which is awarded annually by a scholarship committee made up of Texas faculty members.

At Texas, where fund-raisers specialize in finding interesting and unusual names for their endowments, there is the Good Right Arm Advertising Scholarship for Women Athletes, named after an advertising agency and given annually to a student-athlete for her performance on the field and her academic interest in advertising. The “Anne G. Broussard Spirit Award for Courage, Loyalty and Enthusiasm” supports a Life Skills program that teaches everything from table manners to interview skills and connects student-athletes with motivational speakers and professionals in their chosen fields.

“For some donors, the name of the scholarship is clearly a selling point,” says Onion. “We will give the donor suggestions and provide a set of guidelines, but I like to leave the naming up to them, to reflect the qualities of the individual being honored.”

Strength in Numbers
Along with cultivating individuals, fund-raisers suggest developing endowments that large groups can sponsor. For example, University of Texas has enlisted its alumni associations to help create endowed scholarships for student-athletes from a particular city. Beginning with its San Antonio chapter, which created the “San Antonio Texas Exes Endowed Scholarship,” the idea has spread to Dallas and Houston, with each chapter annually awarding a scholarship.

Graduating classes are another type of group that can be encouraged to pool resources and create an endowment. “Reunion is a very big deal here at Vanderbilt,” says Wyrick, where the Class of 1951 has fully endowed two scholarships and is raising money for a third. “Rather than everybody giving smaller gifts across campus, the Class of 1951 decided to endow a scholarship in the name of its class. There were more than 75 donors in that group, and probably 10 of those gave more than $50,000. They elected a chair, and we were able to use his name to encourage other donors.”

At Stanford, fund-raisers have created groups of donors by finding a single individual who can offer matching funds and appealing to other donors who want to get more for their money. “We find donors who are interested in contributing matching funds because they like the idea of jump-starting what we’re trying to do,” says Kates. “That’s a very attractive gift, because it attracts donors who like the idea that their $20,000 will become $25,000.”

At Vanderbilt, members of the school’s most successful football team came together to create the “1955 Gator Bowl Team Scholarship.” Again, the fund started with one donor. “That was the most prestigious victory we ever had in football, and the members of that team have kept in touch over the years,” says Wyrick. “We started with one player on the team, and he recruited two more, and those two recruited four more, and next thing you know, we’ve got a scholarship.”

Creating endowed funds in the name of a coach also works well with groups of donors. At N.C. State, the “Kay Yow Scholarship” is named after its legendary women’s basketball coach. “It began with one major donor who said, ‘This is going to happen,’’’ says Wyrick. “From there, people just continued to add onto it, and between her former players and her fans, there are at least a couple of dozen people who’ve contributed to it over the years.”

“When you have coaches retire, or new coaches come in, it gives you an added marketing boost,” says Onion. “If you have a coach who is planning his retirement, you can use that as an incentive to potential donors to honor his impact on the program. On the other hand, if you have a new coach coming in, you can use that as a way to highlight the importance of building up a strong athletic program, so that this coach will have the resources they need.”

Interacting with Athletes
One big question to answer before endowing scholarships, however, is whether the donor or donors will be allowed to interact with the recipient of the scholarship money. The plus is that interaction allows donors to better experience how their money is working. The downside is that it has the potential to allow additional unregulated gifts to be given to the athlete, which violates NCAA rules.

At N.C. State, entry-level donors can contribute partial scholarships to a team, but not to an individual student-athlete. “It’s a really fine line,” says Barbour. “We want donors to have a relationship with student-athletes, but we don’t want them doing anything to violate NCAA rules.”

Other schools say they have benefited greatly by allowing donors to endow a scholarship for a specific student-athlete. “It’s a good idea to foster relationships,” says Retrievi. “It’s not often that people can give money and actually see where it goes, see how it’s helped someone develop and grow. It’s a tremendous opportunity that most philanthropists don’t get, and that’s the number one reason why people give: the interaction with our student-athletes. You just can’t replace that.”

“Hands-down, the biggest motivation factor is our student-athletes,” agrees Onion. “Donors are looking for a way to impact the program, where they can feel an emotional bond. So we try to introduce the donor to the student-athlete benefiting from the endowment and to encourage them to interact. I have one donor who has funded two or three endowments, and if you walk into her home today, you will actually see photos of those student-athletes sitting up on her mantle, as if they were her own children.”

But in order to stay within NCAA rules, the interactions need to be carefully structured. At Stanford, where Kates has worked for the last 15 years, a compliance officer helps him plan visits between donors and student-athletes. Coaches are sent regular memos, and alumni are kept informed with newsletter articles about what is and isn’t allowable. In addition, some basic guidelines for donors are posted right on the Cardinal Web site.

The Next Level
By far, the most common use of endowments is to fund scholarships for student-athletes. But at a handful of larger schools, where endowments have been building for a long time, donors can endow an even bigger gift: a coach’s salary.

“We’re trying to set up coaching endowments, which are akin to chairs on the academic side of the university,” says Kates, who has helped secure endowments for the head football and baseball coaches at Stanford. “For your most visible coaches, it’s very hard to create an endowment big enough to pay their whole salary. But if you’ve got an income stream that pays even part of your coaches’ salaries, it’s a great help for your budget.”

“That is definitely cutting edge,” says Wyrick, who helped raise the $3 million to create Vanderbilt’s first fully endowed coaching position. “First, we hired a football coach who is not only a super coach but a great community servant and a great human being. And second, we had a donor who wanted to directly help the football program. So we introduced them, and they started developing a relationship with each other.

“We approached the donor with what I call the menu approach,” continues Wyrick. “You want to create a situation where the donor is in a position to say yes to something. They could name some type of facility. They could name a scholarship for a student-athlete. Or they could name a coaching position, with that football coach in particular, which is really the ultimate gift. And that’s what they did.”

Building Your Base
No matter how many different reasons your endowment donors have for giving, many of them are looking for the same return on their investment. “It’s hugely important to thank your donors publicly,” says Wyrick. “There’s nothing bigger.”

Most schools ask their donors to attend banquet dinners, send them thank you letters, engrave their name on a plaque, print their name in programs, invite them onto the field during half-time, and publicize their gifts in alumni newsletters. It’s enormously important to make a fuss. Because the publicity isn’t just for the donor—it’s for the university.

“Your future prospects are looking at how you’re treating your current donor base,” says Onion. “So if you’re not recognizing your donors, and you’re not making sure they’re pleased with your program, you’ll see that reflected down the road in a lack of new donors. And sometimes, your current endowment funders are your best salespeople.”

“It’s like drilling for oil,” says Kates. “It takes time, and sometimes you end up with a dry well, and you have to accept that. It takes detail work, interpersonal skills, and enjoying people. Most of all, it’s about believing in your cause. If you’re sincere and honest about what you’re raising money for, you’ll find people out there who’ll share that passion with you.”

“You need to look for opportunities,” adds Onion. “There has never been a time in intercollegiate athletics where private support has played as valuable a role as it does now.”


SIDEBAR:
The Big Picture
Whether your fund-raising team is a part of the university’s development office or a separate entity, there must be a good working relationship among all those who are soliciting endowments.

“Especially if you are a separate fund-raising entity, it’s important to have good communication with the university,” says David Onion, Director of Development for the Longhorn Foundation at the University of Texas. “It will help cultivate good will towards the university as a whole. Because you’re only as strong as your collective unit.”

“What a prospect would really like to see is a coordinated approach,” says John Kates, Director of Major Gifts at Stanford University. “If you don’t coordinate your efforts, you run the risk that your prospect is going to be approached by three different parts of your school, and the prospect is going to say, ‘I just can’t sort this out. You guys get your act together, and then we’ll talk about it.’”

At Stanford, working together means sharing leads about prospects with university fund-raisers, writing reports to each other, and coordinating all those efforts into a single request. Sometimes Kates will get the chance to make “the ask” for a gift, and sometimes he’ll have to step aside so that one of his colleagues in another department can do so.

“We’re all paid to raise money for our own areas, but if we get into turf battles over this, we’re all going to lose—especially the university,” Kates says. “We’ve been very good at making sure our donors aren’t approached until we’ve internally worked out our strategy.”