Planning for strategic budget cuts in advancement during COVID-19

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Planning for strategic budget cuts in advancement during COVID-19

The past decade has been a triumphant one for college and university fundraisers. Buoyed by the bull market, they’ve closed big campaigns and consistently topped previous years’ records for new gifts and commitments.

Yet the novel coronavirus’s arrival has put an end to the party. Many advancement leaders are now facing a stark reality in which they will have to curtail their operations and cut back on their budgets.

The budget cuts that advancement now faces are a stark departure from the norm. The average US higher ed advancement team saw their budget increase by 94.3% between 2010 and 2019.

Average advancement expenditure FY2010 – FY2019

Source: EAB analysis of Voluntary Support of Education Survey dataset

That growth has been fueled by presidents’ and boards’ recognition that advancement is the highest ROI investment they can make. Across US and Canadian institutions, every dollar spent on advancement brings in, on average, $6.51 in new gifts and commitments, per EAB’s ROI benchmarking initiative that features data from over 240 institutions.

University leaders’ enthusiasm for advancement hasn’t waned with COVID-19’s arrival. In fact, a recent Inside Higher Ed survey of presidents found that cultivating new donor bases was the #1 way they planned on bridging revenue gaps caused by the pandemic.

What has waned, however, are the dollars they’re willing to spend to achieve those outcomes. EAB’s own survey of advancement leaders in late June found that nearly half of advancement leaders are expecting cuts to their budgets of 10% or more.

Expected decrease in advancement budget for FY 2021 v. FY2020

Source: Advancement Forum interviews and analysis

Advancement’s heavy investment in events and travel, for the time being, has given advancement leaders some breathing room to absorb budget cuts without an immediate impact to their operations.

Yet as we move into the fall, most campuses are bracing for even greater revenue pressure—and, consequently, more substantial cuts. Fall enrollment is progressing precariously at best, and forecasters are issuing dire predictions that we will soon see steep drops in tuition and auxiliary revenues.

If the more drastic of those forecasts come true, advancement leaders will likely have to extend the cuts past the events and travel that had ground to a halt anyway—and perhaps even turn to layoffs.

Advancement leaders are caught between a rock and a hard place. Further cuts are almost a guarantee, yet expectations for fundraiser performance remain sky-high.

To navigate through these pressures, advancement leaders are developing a three-pronged approach designed to mitigate the impact of cuts on fundraising performance.

Look to consolidate overlapping units

First, advancement leaders are using budget cuts as an opportunity to find long-overdue efficiencies within their organizational structure. Annual giving, alumni relations, and advancement communications already operate in parallel lanes, and some chief advancement officers are capitalizing on this moment by merging them together. Doing so yields cost savings by eliminating redundancies in operations.

Some chief advancement officers are also pulling unit-based fundraisers back to central development. EAB’s research shows that centralized gift officers consistently outraise their unit-based counterparts. On top of that, equitably staffing each unit on campus can be a resource-intensive enterprise. Consolidating frontline fundraiser staffing in the central team can mitigate those resource demands.

Prioritize cuts to units that have lower ROI impact

EAB’s research shows that high-ROI institutions invest more staffing resources (as a share of the total) in development (+6.1%) and advancement services (+1.1%) and fewer resources in alumni relations and advancement communications (-7.0%).

While there is certainly a level past which cuts to these engagement functions undermine efforts to win donor mindshare and build relationships, institutions that dedicate more than 1 in 5 FTEs to them may wish to take a closer look at their ROI.

Start at the bottom of the performance curve

While the aggregate ROI on major gift officer staffing is sky-high, EAB’s research has shown that performance is radically unbalanced within teams. Often, a small cohort of top-performing fundraisers bring in the lion’s share of revenue. Many major gift fundraisers barely raise their salary each year.

Indeed, when you look at median performance within major gift teams, you find that more than half of tenured major gift officers submit fewer than 17 proposals and close fewer than 13 gifts each year. Fewer than 6 gifts of those gifts are above $25,000.

For some gift officers, this underperformance is a passing phase—they may still be ramping up within their portfolio, or perhaps they are facing a temporarily dry pipeline after a few big years. For others, though, it is endemic.

With big cuts looming, many of the advancement leaders my research team spoke with said they are closely examining performance and making some very tough decisions about the future composition of their frontline team.

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