Donations from Alumni are an Important Source of Income for Universities - Literature review Example

Donations from alumni are an important source of income for universities Introduction Fundraising activities are gaining tremendous importance for the administrators at various colleges and universities across the globe due to a decline in government support towards total funding of the higher educational sector. National governments are seen to give more priority to elementary and secondary education compared to higher education. While the governments invest about 30-40% of the state expenditure on elementary and secondary education, the high education fund comprises approximately 1% of total expenditure made. Research and studies show that in light of the present scenario, fundraising ability has become one of the important aspects of the job description of college presidents and deans at nearly all institutions. In order to meet these strategic requirements, the institutions are presently competing to attract top students as well research and other educational grants. However, a major constraint in this regard is ability of the institutions to access fund from donors. This is because donors usually tend to fund successful programs without considering the fact that even to create a successful program, a particular institution would require fund (NASBO, 2013). Significant dependence on alumni donation for facilitating growth and sustainability draws a distinguishing line between the higher education sector and other industries. Every dime that is invested by alumni is of critical importance for the universities and colleges because it is used to finance various initiatives undertaken and define the margin of success attained (Long and Riley, 2007, Leslie and Ramey1988). Academic findings regarding alumni donations Alumni donations are distinct in nature compared other sources of revenue in respect of the higher educational institutions because unlike general revenue sources that are influenced by the administrative choices and characteristics of student bodies, alumni donations are regulated by individuals’ perception and choices. Scholarly interest regarding alumni funding to the universities and other higher educational institutions has increased significantly in recent years. Increasing demand for fund in the health, security, transportation and administrative sectors has allowed a very little share of government expenditure to be allotted to the higher education sector. In addition, the same has been declining consistently over the years (NASBO, 2013). According to Walters (2006), healthcare is the most common reason that is cited by the government bodies for investing and allocating lower amounts in higher education. The government bodies further explains that over educational sector, their priority is to serve the aging population, which entails various costs associated with short visits made to hospital, insurance and other medical bills. Previously, alumni donations were mere sources of scholarship, but presently they have become an integral part of university budget and a necessary contribution for managing daily operations therein. In recent years, researchers have studied a wide array of factors that help in recognising principal determinants of alumni giving. Mann (2007) identified various reasons that influence alumni to make donations and concluded that it is not a selfless act on part of the donor who also expects a favour in return. The return can be altruistic as well as materialistic in nature, which implies that the reasons range from generosity to tax benefits. Harrison, Mitchell and Perterson (1995) highlighted that although the nature of ownership of institution (government and private) has no significant effect on alumni donation, investments related to development of personnel, inter-curricular activities and other development programs are major stimulants. These findings are able to add fresh perspective to the generalised notion, stating that only sports related activities draw donations from alumni. Contrastingly, Okunade and Beri (1997) discovered that probability of donation is marginally related to the time factor in context of graduation, post graduation and other professional degree and willingness to recommend the institution concerned to family ties and other known donors. Michael (2005) had established a significant relationship between alumni giving and national ranking of an organisation. In other words, he observed that most donors prefer to invest in an institution that is already successful in terms of performance or has a commendable reputation. Along with the above mentioned authors, Wunnava and Lauze (2001) pointed out in their research that male alumni members bearing high degree of attachment with the institution and nearing job retirement show higher tendency to donate. Ficano and Cunningham (2001) and Terry and Macy (2007) further added to the existing literature by suggesting a number of factors that have profound impact on alumni giving. These factors are academic reputation of the institution, faculty member and student ratio, functions and administrative structure, scholastic achievements of students and vocational choices available to students. Overall, considering the current literature, a majority of alumni donation comes from individuals who feel connected to the university or institution and believe in its welfare. Alumni donations are different from general donations. General donations are made with feelings such as, empathy and condolence, as well as with the basic purpose of developing the society. However, alumni donation is highly specific in nature as it is a form of economic exchange that aims to support student and institutional development as a whole. Alumni donations are primarily financial aids, while general donation can take any shape such as, cash as well as kind. For a number of donors, the alumni giving is a form of returning favour to the particular institution for the experience gained therein (Long and Riley, 2007). Another motivational factor that has impacted alumni donation is prestige. Alumni giving improve as the donors’ names are highlighted in the annual reports and other organisational activities owing to the donation made. Many institutions utilise such emotions as their marketing tools so as to attract greater share of donation. For a group of donors, it is a method of creating wealth, rather than mere redistribution. However, a number of alumni donate out of genuine concern that they feel towards an organisation’s educational quality. They undertake financial effort so that overall environment of higher education can be improved and high quality of service is delivered. Furthermore, alumni make donations because of their past involvement with an organisation and also to ensure better institutional quality (Terry and Macy, 2007). Case analysis on Cambridge University: Marketing techniques employed by the university to raise fund through alumni donation According to a report published in The Guardian (2013), British universities are increasingly adopting the fundraising style of their American counterparts. The universities are constantly trying to persuade their former students to invest therein in the form of donation so as to improve quality of higher education offered. Despite turbulence in the economic environment, the universities in the United Kingdom were successful to obtain annual donation of £581 million in 2009-10, which rose to £774 million in 2011-12. Cambridge University is one of the oldest and finest universities in the United Kingdom. According to Financial Times (2011), the university raised approximately £1.2 billion on completion of the fundraising drive. The university generally has 10-year campaign drive, which is improvised continuously so as to attract great share of donation. Along with Cambridge, another elite university, named Oxford, dominates a major share of alumni donation in the United Kingdom. It was further observed that not only the central institution, but also the affiliated colleges of these universities participate in fundraising activities, thereby capturing substantial share of donation. It has been previously discussed in the literature that prestige is one of the motivating factor that facilitates donation by alumni. In Cambridge, the campaign review publicly recognizes and lists name of the donors. Such a technique can be considered as a powerful source of marketing. Another important factor that stimulates the donors is their aspiration to help those in need of financial aid pertaining to education. The university makes sure that these details are clearly mentioned and explained to the donors (Peridot Partners, 2014; Cambridge in America, 2012). Social media has become a very important tool for the university to stay connected to its former students. Various social networking sites such as, Facebook, Twitter and LinkedIn, are utilised in order to communicate with the alumni and subsequently retain their attention and loyalty towards activities conducted. In Cambridge, the alumni relation office is primarily responsible for ensuring that alumni are engaged with activities of the institution. In addition, the university ensures that the alumni are provided with considerable help on part of the university with respect to job opportunities (Peridot Partners, 2014). Conclusion The Cambridge University has taken measures in past and makes adequate efforts presently in order to maintain healthy relationship with its alumni and raise fund philanthropically. The head of alumni and development communications is chiefly responsible for designing and delivering communication strategies with respect to alumni relations (Peridot Partners, 2014). The university also has an alumni relation team that is responsible for instilling greater engagement of alumni in the internal collegiate Cambridge community as well as in its global alumni community (Peridot Partners, 2014). Another reason for alumni to donate heavily in the university is its history of excellence and achievements. As a result, the university undertakes measures internally so as to improve educational environment. Another aspect of donation that the university promotes is tax benefit. In addition, the university provides the alumni with personalised merchandise, besides arranging alumni weekend and travel programs (Cambridge in America, 2012). Reflective piece on learning from previous assignment The current assignment has been a great opportunity for me to correct my previous mistakes, which was a result of ignorance. The subject of my present assignment helped me to be aware of the role of alumni in respect of improving the educational environment. While working on this piece of article, I realised minor mistakes that I had made in my previous assignment and accordingly put my best effort to improve content quality. In my previous assignment, I had faced difficulties in areas related to referencing style, segmentation of the essay in appropriate sections, writing appropriate introduction and concluding remarks, incorrect format, informal writing style and inability to express ideas in appropriate words. Additionally, I was unable to locate relevant information with respect to the assignment subject. While working on the current assignment, I had initially written a draft and repeatedly reviewed the same so as to eliminate the previous flaws. It was a time consuming task as I am still learning; but I expect that my efforts will be useful in penning this assignment as well as future ones. On writing the first draft, I recognised certain issues while defining the main ideas, filtering out unnecessary explanations and developing overall summary. In this context, I had great support from my peer group and instructor who helped me with continuous feedback on my work. In order to improve further, I applied certain strategies that I expect to be reflected in my present assignment. The subject matter of the current assignment requires an in-depth understanding from academic as well as practical perspectives. Consequently, I organised my activities in different parts and stayed focused on description of the assignment. Moreover, I studied more literatures for this essay compared to other assignments and had also revised my document for multiple times. Throughout the draft, I concentrated upon adhering to activities that are relevant to the paper. A strict regime with extreme rigor helped me to maintain my focus and enhanced my organising, writing and reading skills. I referred to academic journals as well as online sources for improving writing skills and upgrading knowledge about writing style, language, headings, spacing, formatting and alignments necessary for improving content quality. I have also learned about various referencing styles and citations and correctly implemented the same herein. Overall, I believe that I have been able to correct most of my previous mistakes and develop appropriate abilities to improve future assignments undertaken. Reference list Cambridge in America, 2012. Alumni benefits. [online] Available at: [Accessed 8 August 2014]. Ficano, C. and Cunningham, B., 2001. The determinants of donative revenue flows from alumni of higher education. Journal of Human Resources, 37(3), pp. 540-569. Financial Times, 2011. Cambridge raises £1.2bn in fund drive. [online] available at: [Accessed 8 August 2014]. Harrison, W., Mitchell, S. and Peterson, S., 1995. Alumni donations and colleges development expenditures: Does spending matter? American Journal of Economics and Sociology, 54(1), pp. 397-412. Leslie, L. and Ramey, G., 1988. Donor behaviour and voluntary support for higher education institutions. Journal of Higher Education, 59(2), pp. 115-132. Long, B. T. and Riley, E., 2007. Financial aid: A broken bridge to college access?. Harvard Educational Review, 77(1), pp. 39-63. Mann, T., 2007. College fundraising using theoretical perspectives to understand donor motives. International Journal of Education Advancement, 7(1), pp. 35-45. Michael, S., 2005. The cost of excellence: The financial implications of institutional rankings. International Journal of Education Management, 19(5), pp. 365-382. NASBO, 2013. State expenditure report 2011-2013. [pdf] National Association of State Budget Officers. Available at: [Accessed 7 August 2014]. Okunade, A. And Berri, R., 1997. Determinants of charitable giving of business school alumni. Research in Higher Education, 38(1), pp. 201-214. Peridot Partners, 2014. Head of Alumni and Development Communications – University of Cambridge Development and Alumni Relations Office. [online] Available at: [Accessed 8 August 2014]. Terry, N. and Macy, A., 2007. Determinants of alumni giving rates. Journal of Economics and Economic Education Research, 8(3), pp. 3-17. The Guardian, 2013. Donations to UK universities from alumni reach record levels. [online] available at: [Accessed 8 August 2014]. Walters, A. K., 2006. Public colleges should look upon the latest uptick in their state support as a brief respite from famine rather than a return to times of plenty. Chronicle of Higher Education, 52(27), A1. Wunnava, P. and Lauze, M., 2001. Alumni giving at a small liberal arts college: evidence from consistent and occasional donors. Economics of Education Review, 20(1), pp. 533-543. Read More