Introduction
Australian educational institutions are under financial strain unlike ever before with increased competition for student fees, decreased government funding and the lingering effects of the COVID pandemic on international student income. In addition, cost pressures continue to mount as funding for new facilities, higher staff salaries and expensive innovation programs become prerequisites to remain relevant in a fast-evolving industry.
These financial pressures have education leaders around the country re-examining their finances in a search for possible new sources of income. Chief among options for revenue augmentation is the super charging of alumni contributions, long considered to be an area of high potential in the Australian education sector. Whilst contributions have grown remarkably over the last fifteen years from AUD 161M in 2005 to around AUD 476M[1] in 2021, they still remain small by global standards. Harvard University alone receives nearly four times Australia’s donation revenue with around AUD 1.9B[2] annually. Perhaps even more telling are alumni giving participation rates across Australian higher education, with around one percent of alumni having donated over the last 24 months, compared to an average participation rate of eight percent in the United States and around forty percent for best-in-class international universities.
Beyond the Australian educational philanthropy market being decidedly underdeveloped compared to its peers, it is also highly skewed in terms of its recipients. Australia’s top five universities receive some seventy-three percent of all donations with many smaller institutions including private schools receiving only token alumni contributions – largely as a result of immature alumni engagement programs. For these private schools and smaller institutions this means that the financial opportunities associated with an improved alumni relations program are enormous. With existing participation rates at fractions of one percent even modest increases can have substantial economic impacts.
Given both the financial pressure in the education sector as well as the untapped opportunity within alumni bases, institutions should consider how they can act now to better engage and activate their alumni networks. This means controversially changing the objectives of alumni giving away from securing one-off donations and towards developing alumni as lifetime contributors to an organisation to which they consider themselves intimately connected. This requires a new approach of deep alumni engagement and the creation of a genuine two-way relationship between an institution and its community.
Psychology of alumni giving
Over the last decade extensive academic research has been done into alumni giving to understand the psychological drivers for past students to contribute to their alma mater. Specifically, predisposition to giving is predicated on three primary criteria: in-school experiences, interaction with the school post-graduation and financial ability to donate.
In-school experience
Surprisingly, in-school experience does not necessarily refer to quality of academics, though of course that is important to the future success and financial capacity of students. Instead, future giving is predicted by the number of emotion-charged bonds that students create whilst at the school. Such bonds are typically between students but can also be with faculty or support staff. Students who develop extensive and long-lasting friendships in their school life usually tend to be more willing to donate because they have acquired a rich social network that they highly value and which they feel an obligation to “repay”.
The overwhelmingly prevalent in‐school experience that affects alumni giving is participation in extracurricular activities. Extracurricular participation tends to build stronger lifelong networks and create positive feelings towards the institution that grow in strength over time.
Given these influences, in-school experience will be typically stronger in smaller schools and campuses, which are able to create networks and friendships more easily and organically amongst students and staff. Notwithstanding this, many of the larger education institutions, armed with this knowledge, create learning structures and social groupings (e.g., student sections, work teams and study groups) that are able to stimulate the creation of these tight networks and relationships on a mass scale.
Post-graduation connection
Academic studies agree that the quality and quantity of post‐graduation interaction with students is directly corelated with alumni giving. So strong is this relationship that even students who have had average in-school experiences can be influenced to increase their giving through positive post-graduation interactions. Indeed, done correctly, communication and messaging can in fact improve an alumni’s memories of their historical in-school experiences.
Reunions are of course an important component to nurturing a post-graduation relationship between the school and its alumni and this is the reason that leading institutions spend so much time and valuable resources promoting and executing such events. Harvard go so far as to recall their most famous professors to campus, interrupting their summer vacations, just to present one-hour “star lectures” to alumni with the hope of currying favor with future givers.
But reunions are not everything and in the global, remote, post-COVID world that we live in, institutions must find new ways of developing connections. This requires a multichannel communication strategy, which is a mixture of information, education and engagement. As an example, some institutions make alumni stakeholders in the governance of the institution, giving graduates voting rights on board members or policy decisions in an effort to increase their sense of institutional connection.
Financial capacity
Cruelly, an alumni’s greatest capacity for giving occurs as they approach retirement and are therefore most distant from their educational experience. This represents a challenge for institutions that means they must put in place programs to ensure campus experiences and schoolyard friendships are kept fresh in the minds of their past students over periods of forty or more years.
Strategies to bolster giving
Education executives often lament the levels of alumni giving in Australia, blaming a lack of culture around educational philanthropy. Whilst this may be partially true, culture is something which can be influenced and moulded, particularly within a school setting. The most advanced institutions in this area do not leave alumni donations to chance but put in place carefully considered structures, processes and relationships which ensure that their students are disposed to lifetime giving.
Connection
At a most basic level, institutions must ensure that they remain connected to their graduates. The most recent CASE survey reports that only around seventy-five percent of Australian university alumni were contactable and that for some institutions this number was as low as fifty percent. This is a truly astonishing statistic given the information age in which we now live. The advent of LinkedIn, Facebook, Twitter and Instagram, not to mention searchable databases, means that alumni are visible and accessible to a level unlike any time before in human history. Low connection percentages speak more to institutions’ limited ability to clean, interrogate and integrate their data rather than the traceability of their alumni. Traditional offline alumni databases are already becoming redundant as our lives change too quickly to be tracked manually. The most sophisticated institutions have already integrated their alumni databases with social networking tools ensuring alumni contact details are updated in real time and that engagement offices are alerted to life changes that offer opportunities for post-graduation interaction.
Historically, the provision by universities of an “email for life” was a clever tactic seen not only as giving something back to students but also ensuring universities had a lifelong way to remain in contact with their alumni. Whilst this still remains a good initiative, education providers will need to continue to adapt these tactics as technology evolves. Leading providers are already experimenting with ideas such as blockchain registered alumni certifications and alumni collaboration spaces on social media to create enduring virtual links with past students.
Reciprocity (reverse gifting)
Institutions are increasingly relying on a technique known as reciprocity as a driver of alumni giving. The concept of reciprocity is the singularly overwhelming urge that we all have has human beings to repay the debt we feel when we have received unsolicited gifts. Harvard MBA’s are repeatedly told during their two years on campus that the cost of their course exceeds many times over their tuition fees and that they are in fact being gifted their degree by the school’s many financial donors. Constantly reminded of this unsolicited gift, alumni are more willing in the future to make donations to “pay back” the perceived debt they have to the institution.
Reverse gifting can take many forms and need not be costly in nature provided it generates high levels of value for alumni. Invitations to events, access to teaching staff, publication of alumni news and on-going career services are all valuable options to shine a spotlight on intention of an institution to keep giving back to its alumni network beyond graduation.
Giving as a habit
Even reluctant alumni can be trained to donate should the right set of circumstances be created. Especially effective in developing alumni habits around philanthropy is the concept of cohort giving. In this structure, the institution seeks funds from a defined group and then, in turn, the leaders of that group request contributions from the other group members in order to build a cohort donation. The cohort could be a particular year, department or extracurricular group, but should ideally be small enough so that members are known to one another. These cohort giving structures are ideally created when students are still at the institution with the intention of getting students in the habit of giving. The initial focus is not on the size of the gift but simply on ensuring that every member of the cohort participates. If this habit can be started early enough (and repeated annually), then not only do members develop a muscle memory for giving, but the contribution amounts increase organically as alumni become increasingly affluent. Cohort giving also creates great opportunities to add a competitive element to giving, which can then be leveraged to increase both contributions as well as overall participation percentages.
Conclusion
Institutions across the education spectrum from secondary schools to universities and private colleges are increasingly making a conscious effort to cultivate alumni support and make alumni gifting a central pillar of their present and future financing strategies. This decision brings with it an understanding that alumni development requires a long-term strategy over decades. Whilst initiatives to improve student on-campus experience, post-graduation engagement and on-going alumni connectivity all require immediate investment in time and resources the economic return on investment is only realised over the long term.
To deliver on these new revenue streams, institutions are revisiting their structures, systems and processes for managing alumni. As an example, leading private secondary schools are doing away with old structures that left alumni relations to underfunded alumni associations and are instead creating in-house, well-funded engagement departments, replicating the structures of larger, more sophisticated universities. This is a recognition that alumni relations should be at the core of a school’s operations and not treated as a peripheral activity.
Moving forward, we expect sophistication around alumni relations to continue to develop with technology leading the way in allowing the execution of more alumni contact, that brings greater value, delivered at a lower cost. This new approach will be based on the underlying drivers of education philanthropy and will utilise new techniques geared towards conditioning students towards lifetime giving.More generally across all institutions, engagement departments are receiving more budget and new digital tools to enable them to fulfil their mandate of engaging the graduate community. Alumni relations staff are utilising more innovative and meaningful forms of engagement as they seek to bring more value to alumni whether in their corporate, professional or personal lives. The old concept of a plaque on the library wall is not gone, but engagement offices are exploring in greater depth value added concepts of lifelong learning, legacy and social legitimacy with their alumni bases.
[1] Australian Government – Department of Education
[2] Council aid to education
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