CoolData blog

15 February 2012

Are we underestimating the generosity of our older alums?

Filed under: Alumni, Annual Giving, John Sammis, Peter Wylie — Tags: , , — kevinmacdonell @ 8:50 am

Guest post by Peter Wylie and John Sammis

(Download a PDF version here: Are we underestimating the generosity of our older alums?)

I’m an older alum. I don’t want my generosity to be underestimated by my alma mater. Trouble is, if any of my old college buddies happen to read this, they’ll say, “Really? And what generosity would that be, Pete?”

Yeah, well, I’m not the kind of person we’re talking about in this piece. We’re talking about alums who graduated at least 30 years ago and have made substantial contributions to their colleges or universities. There are a heck of a lot of them out there, and more and more such alums are joining the ranks as our population ages.

So … let’s say you work in advancement in higher education or a secondary school. Does the data you have stored on these “senior” folks cause you to underestimate what they’ve given to your institution? John Sammis and I would offer a strong “yes” to this question. Why? Because of two phenomena that most of us rarely consider when we look at the lifetime hard credit dollars given by these alums: (1) inflation and (2) the fact that electronic giving records rarely go back much further than 1985.

In this piece we’ll take you through a series of examples from one college that has many older alums. The folks who work in advancement at that college agree with us. They think that inflation and electronic record keeping have caused them to underestimate the generosity of many of their older alums. We hope you find the examples intriguing, and we hope they cause you to think about how you may be doing the same kind of underestimating.

Let’s start off by looking at the lifetime hard credit giving at our example college. Table 1 shows that the oldest class year quartile (alums who graduated between 1931 and 1976) have given far more than the remaining three quarters of younger alums.

We see this kind of phenomenon nearly every week when we look at a new alumni database. The oldest 25% of alums almost always dwarf the cumulative giving of all other alums. And yet, in spite of that fact, we think the giving of these older alums is underrepresented. Bear with us.

Now let’s look at Table 2, which gives a picture of the inflation that has occurred in the United States over the last 60 years or so.

To make sure we’re being clear in the table, we’d ask you to indulge us and answer these three questions:

  1. If an alum made a gift of $161 dollars in 1950, what would that gift amount to in 2011 dollars?
  2. If an alum made a $50,000 gift in 2011, what would be the 1965 equivalent of that gift?
  3. If an alum made a gift of $1,198 in 1975, what would that gift amount to in 2011 dollars?

If you came up with these answers, we’ve been clear:

  1. $1,500
  2. $6,914
  3. $5,000

If you found the table a bit confusing, maybe a look at Figure 1 will help. It shows the same information conveyed in the leftmost column of Table 2. Whether you look at the table or the figure, the big picture is that there has been a good amount of inflation in this country over the last six decades. More to the point, what look like small gifts made decades ago look like very substantial gifts in today’s dollars.

What we’ll be doing now is speculative. We’ll be looking at the dollars that specific alums at our example school have contributed over many years. And then we’ll be estimating what those dollars are worth in terms of 2011 dollars. We should caution you: Our estimates could be pretty accurate, or they could be off the mark by quite a bit.

We’ll start by looking at the top five lifetime givers in each of the class year quartiles as laid out in Table 3. As you’d expect, the giving of the top five alums in the first quartile (those graduating between 1931 and 1976) greatly outdistances the giving of the second quartile top five alums (those graduating between 1977 and 1989) and so on down the line.

Now let’s check out something interesting for just the top five givers in class year quartiles 1 and 2. Notice in Figure 2 below that:

  • The number one giver graduated in 1943 but didn’t make a first gift until 1983.
  • The number two giver graduated in 1959 but didn’t make a first gift until 1984
  • The number three giver graduated in 1967 but didn’t make a first gift until 1984.
  • The number four giver graduated in 1949 but didn’t make a first gift until 1983.
  • The number five giver graduated in 1965 but didn’t make a first gift until 1984.

Now take a look at Figure 3. Notice that:

  • The number one giver graduated in 1983 and made a first gift in 1983.
  • The number two giver graduated in 1985 and made a first gift in 1994. (This is the first time we’ve seen a first gift made after 1984.)
  • The number three giver graduated in 1981 and made a first gift in 1983.
  • The number four giver graduated in 1980 and made a first gift in 1983.
  • The number five giver graduated in 1978 and made a first gift in 1984.

That was a lot of detail to offer you – maybe more than necessary. But by offering the detail we wanted to make at least two important points. The first is that our example college obviously has not recorded gift giving (electronically) before 1983. How do we conclude that (other than the fact that our contacts at the college confirmed it)? Because none of the ten alums we’ve looked at are listed as having made a first gift before 1983. No big surprise there.

But we think our second point is more attention-getting. In both quartiles there are alums listed as having graduated before 1983 (some of them long before then). What do we know about their giving prior to 1983? That’s our second point. We simply don’t know what their giving was prior to 1983. And here’s where our speculation comes in.

This is what we did. For each of the top three givers in the first and second class year quartiles, we made two inflation adjustments to their actual lifetime giving amounts: A conservative estimate, and a liberal estimate. As you read through how we made these estimates, you may disagree to some extent with our approach. We’d be surprised if you didn’t. But we’d like to defer discussion of such disagreements until the end of the piece.

The conservative estimate.

We took the year of each alum’s first gift and the year of each alum’s last gift, added them together, and divided that number by two. For example, let’s take the top giver in Quartile 1 whose lifetime hard credit giving is recorded as $11,286,872. That alum’s recorded year of first gift is 1983. His or her last gift was made in 2005. The average we computed was 1994. Using an inflation calculator, we arrived at an estimated lifetime giving amount of $17,097,560. In other words we converted $11,286,872 from 1994 dollars to 2011 dollars.

The liberal estimate.

We took each alum’s year of graduation and the year of each alum’s last gift, added them together, and divided that number by two. Let’s go back to our example of the top giver in Quartile 1 whose lifetime hard credit giving is recorded as $11,286,872. That alum’s year of graduation is 1943. His or her last gift was made in 2005. The average we computed was 1974. Using the same inflation calculator, we arrived at an estimated lifetime giving amount of $51,384,972. In other words we converted $11,286,872 from 1974 dollars to 2011 dollars.

In Figures 4-6 we compare the top three givers in class year quartile 1 and class year quartile 2 in terms of recorded lifetime giving, a conservative estimate of inflation adjusted giving, and a liberal estimate of inflation adjusted giving. In each figure you’ll see some dramatic giving differences between the older alum in class year quartile 1 (1931-1976) and the younger alum in class year quartile 2 (1977-1989). Since we’ve already covered a lot of information included in Figure 4, we’ll skip to Figure 5 and offer some reasons for why these differences are so large. To avoid overloading you with detail, we won’t do that for Figure 6, but if we did, the same kind of thinking would apply.

Here the older alum graduated in 1959, and the younger alum graduated in 1985. The older alums is electronically listed as having made his or her first gift in 1984 and his or her last gift in 2010 The younger alum made his or her first gift in 1994 and his or her last gift in 2008. Here’s what we think is going on:

  • We’re certain that the actual giving amount for the younger alum ($3,127,000) is accurate. We’re far less certain about the actual giving amount ($10,150,030) for the older alum. We suspect that this amount is only the money in 2011 dollars that the alum contributed since 1984.
  • How about the conservative estimate for each alum? The amounts for both are greater because we used the middle year between the first and last gift to adjust for inflation.
  • How about the liberal estimate for each alum? Notice that this estimate for the younger alum is the same as the conservative estimate because the middle year for both estimates is the same. But not for the older alum. Here we picked the middle year between 1959 (the alum’s grad year) and 2010 (the last gift year) as the year to adjust for inflation. That year is 1984, thirteen years earlier than 1997, the year we used for the conservative estimate. That’s why we see the large jump from $14,196,156 to $20,777,384.

Closing Thoughts

The first thought we’d like to offer is that no one (including us) should make any hard and fast conclusions from what we’ve presented here. The data are only from one school, and our inflation estimates are certainly open to at least some healthy skepticism.

That said, we’d like you to consider these points:

  • Inflation is something we’ve never seen figured into how lifetime giving is computed at fundraising institutions. In the almost six years the two of us have been working together, we’ve looked at giving data from at least 200 non-profits and schools. In all that time we’ve never had more than a fleeting discussion with anyone at those institutions about how both limited record keeping and inflation have distorted the giving picture they have of older donors. We could blame those folks for that shortcoming, but if we did that, we’d have to blame ourselves more. So we won’t do either. What we will do is start paying more attention to this issue and talking it up. What we’ve seen as a product of doing this paper is strong motivation to do just that.
  • Depending on how accurately your gift data has been stored, it shouldn’t be hard to make more accurate inflation estimates than we have here. We know you’re busy, and we know your advancement services folks are stretched thin. But a little project that involved 20 or so of your major donors who have made multiple gifts might be enlightening. All that would be required is to make an inflation adjustment for each gift for each donor. Then simply add those adjusted gifts up for the donors and compare the recorded lifetime amounts with the inflation adjustment amounts. Maybe you’d have a ho-hum reaction to what you see, but we doubt it.
  • Anything that might get folks in advancement to focus more on the value of their internal data can’t be a bad thing. In prospect research/major giving there is a huge emphasis on looking to the outside of an institution’s database to find evidence of giving capacity for the people stored in that database. There’s nothing wrong with that. Acquiring information about people’s wherewithal to make major gifts is important. However, and this is a big however, there is a huge under-emphasis in the field on looking at internal data – data that is often far more accurate than external data, and certainly far less expensive to access and look at. For example, you simply will not find external data that point to someone in your database who made a seemingly mid-size gift many years ago that is worth a huge amount in today’s dollars. But uncovering that kind of information in your own database could provide a strong hint (that won’t come from any outside source) about that person’s assets as well as his or her likelihood of sharing those assets with the place you work for.

As always, we’d love to get your reactions to what we’ve had to say here.

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1 Comment »

  1. This is certainly something to think about! If nothing else, an inflation adjusted column for any gift over $500.00 calculated by year, could flag some prospects that probably would not be identified in any other manner.

    Comment by h0llings — 16 February 2012 @ 10:54 am


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