Episode 296: Getting Naming Opportunities Correct
I'm so pleased that you would take a few minutes of your day to join me on this edition of Around with Randall. As we look at the way in which we recognize donors, and probably we're talking about higher level gifts, but it can pertain to all kinds of giving, part of the recognition, part of the stewardship is the idea of naming opportunities.
And today we're going to kind of approach this from a process-oriented perspective about what we're really trying to accomplish and how we can do it more effectively. And as we tend to do here on A Round with Randall, we'll kind of take the big picture. Then we'll kind of talk about a couple of the major issues and then give you six tactical solutions that you can use to set out a better process, to properly have an internal conversation and then have the supporting infrastructure documents, communications to have naming as a part of what you are trying to accomplish with stewardship.
This all stems from a conversation working in campaign counsel with a client. As we look at the naming opportunities and there was a discussion about, well, we'll just start naming this, this and this. I said, wait, wait, wait, what's the process to decide? The level, the value, how big someone's gift should be or their other aspects that would determine that particular conversation.
And this led us down the road of what we're going to talk about today. And I think in the end, while we don't have all of the answers, what we found out was, is that a lot of the questions were driving different levels of conversation to get this right. And when the process is pure, whether it's in this or anything else, I think the outcomes become certainly more believable, more reasonable, maybe even more creating more buy-in from more people as you bring them into this conversation.
So let's start at the top and kind of work our way down. Obviously, naming opportunities go back historically in philanthropy, for many, many years, Harvard University was named for a gift. Now, I believe that was in 1624 for John Harvard. And the gift that he made to the university at the time. Now, would you name a university for what John Harvard gave some books and some money? No, but that was also, you know, 400 years ago. But the concept of this has been something that permeates philanthropy and nonprofits for years.
We tend to see historically, particularly in more public institutions, kind of this divergence, which has caused those of us in philanthropy some challenges. Part of the naming has also included the naming of great individuals, but taking away philanthropic opportunities when we recognize the long-term employee, a board member, a key volunteer, you know, someone who has done wonderful things for the organization, but all of a sudden their name is put on something and it causes us an issue, because now we're trying to balance the commitment that a person has, and no one's denying that commitment. But then when somebody makes a gift and what happens with that?
The central question really is here is that how do we rationally create a process to create value for something that really doesn't have a lot of value, but is partially financial, partially emotional, partially visible? And putting all that together into the opportunity to recognize somebody and to steward gifts and do so within the mission and the value of the organization.
So this, as mentioned, universities, hospitals, museums, libraries, there's nobody immune from this. And over time, we tend to do this in very simplistic ways, which causes us problems down the road.
So the first question is or issue is let's start with permanent or temporary. When I first began in this profession, frankly, I never thought about a temporary naming assignment. So if it was a scholarship or an endowed fund, that name would be attached to the family or the couple or whomever wanted to name it based upon the money they gave, and certainly physical space did. But what we've seen over the last 15 or 20 years is a redefinition of this.
We've now begun to introduced the idea of temporary naming, meaning that your name can be established with this particular area for a period of years. It's almost like a sponsorship. It's not a guaranteed thing where I think we see this most prevalently, if you pay attention to sports, is the naming of football stadiums or stadiums in general. But I think I see it more often in football that every so often somebody's stadium name changes.
And that's done because in this case or in that case, it's about for-profit value. They're looking to make money. But it's interesting in that naming opportunities philanthropically have driven the same general direction. And the question becomes, are we selling permanence or are we defining it as a period of years? That becomes kind of a negotiation for that gift or sponsorship to create recognition.
So you're going to have to argue with yourself or argue with someone else, or have a conversation around permanent or temporary.
A second major issue is trying to figure out how much something's worth. Knowing, on the non-capital side, we can more easily set values that you can have a named endowment scholarship fund at $25,000, $50,000, you set bare minimum. We don't want to do that for $2,500 because it's too hard to manage. But at the end of the day, we can do that.
Quite simply, the more complicated one is capital space. How much is a lobby really worth in terms of stewardship and recognition versus a wing, a classroom, a conference room? What is a premise that I spend some time thinking about with clients is the concept of don't just start small.
Meaning if you name something for something large at a very low level, it will trigger issues with everything else. An example without attribution. Former client. Great client. Phenomenal fundraising operation. Many years ago. Put a name on a major facility at an incredibly low dollar amount. And this was 25 years ago. 30 years ago.
To this day, it's causing issues because there are people who say, wait a minute, I'm giving X millions of dollars, why am I only getting that classroom named? And the answer is because our highest-level naming opportunity was given at a level that was so low that it's pushing down the value or the recognition opportunities for everything else.
It's almost like they gave it away. And we'll come to this in the very end about kind of a general premise that causes immense problems.
So the first global comment is don't start too low, create aspiration. And if that means some naming areas opportunities don't get named right away. There's nothing wrong with that. That you're going to help yourself long term if you don't just sacrifice. Well, we got to get a name on everything. No, you don't. Find the value and then include scholarship funds, chairs, endowed funds and capital space.
But in particular with capital space, there's a second part, and I think we can use a little math here, which I'm sure if you're listening to A Round with Randall driving or some of you might be driving off the road. I don't want to do math. I'll do all the work.
I've always believed that that we can use a basic mathematical formula with some, maybe some leading indicators to help us on the on setting some value to at least put some paradigms around opportunities for naming. And that formula is this: somewhere between a quarter and a half. So 50% to 25% down to 25% or 25%, up to 50% of the cost of that area. That particular either venue, area, whatever is what we should try to use as a guide for naming opportunities.
What's an example? So let's say we're renovating an unnamed space for $4 million. To name that space, we would want a gift either in totality or in the ability for a pledge, even a planned gift, which we'll talk about here in a moment, of about $1 to $2 million.
If you have that kind of percentage as a starting point, 25 to 50%. It's not an automatic answer. But what it does do is give you framework, and you might also then throw in, depending on how do you determine 25 or 50? Visibility. Prominence. Traffic. Organizational importance. Useful life. Donor demand. They can all influence that number.
I would also say that the larger the number, the lower the percentage. So if you're doing $100 million pavilion, you might be more likely to take closer to 25% than 50%.
All this is to say is, is this is not mathematical in its application that it's a certainty just to do the math. But what I'm really talking about is that process framework, and this gets you into the conversation, say, well, this generally costs this, and you at least then have some constraints that you can work from.
So think about using math to create a little bit of value.
The third is where we get into the nonspecific. And that's the idea of is there extra value with brand. Some of the great value that comes in naming may have value beyond philanthropy, meaning it brands the organization or we want their name associated. And I'm not saying we just give it away, but I'll give you a few examples, maybe from the health care area, the incredible lives and work of the late Arnold Palmer and the Nicklaus family.
Jack both golf. I'm dealing with hospitals in Florida. What is the value of those organizations to have the Nicklaus name and the Palmer name associated with them? And I would argue immense. Have Jack and his beautiful wife and the late Arnold Palmer and both of his wives. His first wife passed from cancer. Did they make philanthropic gifts? Those are the answers and unequivocal yes, incredibly wonderful people who have been generous with life, with many different aspects of how they share their wealth, both financial wealth and the wealth of advice, knowledge, friendship, things of that nature.
Did they give hundreds of millions of dollars to name these facilities or have these facilities named? I think the answer is probably no, at least at this point. Maybe I'm wrong, but they were named well before that.
The point is, is that sometimes a certain level of engagement now, they had their golf tournaments. Those golf tournaments benefited the hospitals in untold millions of dollars.
But that wasn't sometimes all of their money. The point being is, is that there's incredible brand recognition value by having them involved. I would say that should be part of the equation. And so this does not help us with a concrete number, but it does help us create a conversation around what does a name bring additionally to this conversation, maybe it's a company.
We think about Nationwide a lot of children's hospitals. Sorry, they've done it better than most. Nationwide Children's in Columbus, Ohio. Nationwide has had an incredible, incredible, much like Nicklaus and Palmer, lifetime or legacy built connection to these organizations. What does it mean to have Nationwide's name on that hospital? And I would argue immense. Plus Nationwide has been generous.
So all this to say is, is that there may be conversations about does this elevate us in a certain manner.
So three big issues. The bigger conversation, we come to our final piece, which we try to do in each and every episode of A Round with Randall: tactical solutions, name-creating, some naming constraints of things that you can do.
The first is—and this is not one of the six, it's just generic—you need a naming policy. If you're a separate foundation, you don't actually own the organization. The nonprofit that you support does. So you may need to. The point is, is that I'll talk about six things, but they are going to be built into some type of formal process with groups to review things that don't allow this to be done willy-nilly by one person. But there's naming policies that restrict the organization in the process they go through.
That is not one of the six tactical, but you've got to have a naming policy that's deep enough to say, here's how we make these decisions.
Now we get into the tactical number six, create an inventory, look around and figure out what's things that are options out there. And yes, you're going to start more naturally with buildings and spaces. But don't forget about programs.
We need operational support. A colleague of mine and a client just did something incredible by naming their children's physical therapy program for a donor, a prominent one, by the way, who made an endowment-level gift to begin to endow the physical therapy program for kids. That's not capital space. That's programmatic support. Critically important.
Chairs. Universities have gotten this down. I think it should apply to independent schools and high schools. I think it should apply to health care in other places. Chairs where we have endowment support for positions that are critical for success.
Think about funds and scholarships and things of that nature. Create a long list and do this before the donor starts asking so that you can talk from a position of strength.
Number two, establish a valuation methodology. I talked about this formula. I gave you an example. Maybe that doesn't work for you. Create another one: perception or the percentage of construction costs or having kind of some adjustments for prominence, visibility, strategic importance, market conditions. What we name in New York's going to be different levels than what we name here in Omaha, Nebraska. That's okay.
But create some type of methodology that the organization can buy and put it in the naming policy, not so constricted or concrete you can't move, but say, here are the things that we're going to address in some baselines to work from.
Number three is realizing and creating tiers. And that's also okay. You're going to have different opportunities for different levels of gifts.
I think it's also important in this area to say something that someone I have a great deal of respect for and worked with for a number of years, both professionally, not I didn't work as a side-by-side employee, but in a professional way, and then certainly from a consulting perspective, supported them for a number of years, he said, "We don't sell stuff in philanthropy." Couldn't agree more.
This is recognition. Is there a conversation sometimes that may feel a little salesy? Can that sometimes be unfortunate. But at the end of the day, when we create tiers, we take that away a little bit. We're not selling that. These are the most prominent ways in which we recognize those that have been the greatest supporters and work with us in terms of the mission that we all believe in.
Then there's the next level, then the next level. What this will do is protect some of your most valuable opportunities into categories that are, if you don't give them away at too low a level. Think about the example I mentioned a few minutes ago. It will protect some of the best opportunities for the future to recognize future engagement in the organization.
Number four, very important, is part of the naming policy. Establish naming terms. Create some defined terms. Build in the sense of what your renewal system is. If you're doing it temporarily, what could be added? So if someone's gift is for this level and it's incredible and they name this area but they give more money later, do they get a second naming opportunity? Do we give them a bigger pull, one to give another? All things that can be discussed.
The naming terms are critically important, and here's one that I don't see enough in your gift agreement and matching into your naming opportunity, and probably matching into your gift acceptance policy: you need a morality clause.
You need something that says if donor's name is now besmirched by their own action, they do something stupid, they're arrested, or their namesake—whatever—that the organization has the opportunity to say, with a very defined process, probably with a board, "We're removing your name."
Now, does that mean you have to give the money back? That becomes a legal issue. You might, depending on how the gift agreement is written. But if you don't have the morality clause, you will have to give the money back.
I can promise you, if you want to pull their name off and they were arrested for something, that morality clause should be part of established naming terms, naming opportunities, gift acceptance in every gift agreement, that if something happens, the organization does retain the rights because of brand reputation protection to remove that donor's name from the facility, the scholarship, wherever those naming terms are important.
Number five—and this is an organizational-wide discussion—is separate honoring someone from selling a naming opportunity or creating an opportunity.
And this goes back to where I started. Historically, we've had opportunities where we've taken long-standing employees and put their name on something. I'm not against that. But once that name goes on that, then that creates a problem, a challenge, a larger conversation around how does philanthropy fit into this?
And what I've also seen is once you do it once for, let's say, a long-serving employee, 40 years, we're going to put Barbara's name on the conference room. Then the next 40-year employee says, "What about me?" And then the next one, "What about me?" And what you end up with is this issue.
So you've got to have this conversation with, outside of philanthropy, about employees, board members, volunteers, founders, community leaders who've done maybe non-monetary things. How are you going to assess this? Is there a different way of recognizing non-monetary, non-philanthropic gifts in other ways in the organization?
The last, number six, is build flexibility into this.
You notice when I gave you the mathematical formula I talked about a 25 to 50. That was this exact conversation. When you write your naming policy, when you write your gift acceptance policy, when you do the different gift agreements, there should be enough flexibility to work with donors and find the right, right way of doing this.
It might need to address things like future renovations, relocations, which happens all the time. Discontinued programs. What do we do then? Organizational change. We merge with another organization. Reputational concerns. Somebody does something. Future circumstances which we can't even think about today. How will the organization handle those things?
And no matter what you do, you will never think of every circumstance.
And that's why flexibility is important. And you may have to go back or somebody long after we're, like, left the organization, go back in 25 years and say, look, the building you put your name on, we're going to tear it down. We've got to talk about how we recognize the largest of that gift was, but that building is not going to be there anymore.
This happens all the time.
So six things: create an inventory. Create a methodology of valuation or recognition. Create tiering so that you protect some of the most valuable opportunities out there. Establish some naming terms, or really establish the idea of what it is we're willing to do and not willing to do. And then also that morality clause. Number five is creating an organizational-wide understanding of recognize people that don't make philanthropic financial gifts. But we have other ways of recognizing the contributions. And number six, create some flexibility, even though you may not be able to figure every possibility out. That gives the organization—maybe not you, but the organization and who replaces you—the flexibility to make the right decisions at the time.
All of this is within creating the right naming policy that matches your gift acceptance policy and the gift agreements.
Naming opportunities are assets. They're recognition. We're not selling of amazing contributions of people, organizations, couples, families make. The value should really be put upon the organization to understand the importance that gifts make, elevating people's feeling and connection to the organization, making them proud that their name is associated in some certain way or fashion before offering naming opportunities to all of these factors so that you're speaking and working with donors from a position of strength and knowledge, that it's just not slapping a name on a wall or on a room or on a building.
And I said this at the beginning: if you want an overreaching thought, concluding thought to all of this, the objective in this conversation is the decisions you reach today will not hinder, will not embarrass, will not cause problems for organizational leaders in 20, 30, 40, 50 years from now.
The world may change. As we said, John Harvard, books and some money. You wouldn't name the number one university in the world most likely for that gift today. But that was 400 years ago. How do you create some definition for the next 30, 40, 50 years so everybody can walk in the door and feel good about this? And if you do that, you'll have a way of thanking people that are making a big difference in your nonprofit and in the community for which you live.
Don't forget. Check out the blogs at Hallett Philanthropy. I really kind of enjoy writing these two per week. They're anywhere from 400 to 600 words, and that doesn't mean anything to you. 90 seconds to read. And they cover a lot of ground from, you know, what I see in the profession to things I see with my own personal life about leadership, things I see that don't really reach the level of a podcast, but might help you frame something, go, oh yeah, that's something interesting to think about.
Go to Hallett Philanthropy's blogs, get right into your inbox two per week. Tuesday, Thursday they come out. I'm really surprised how many people read them. To be honest, it's very, very humbling and I'm honored. But I think maybe they're helpful just to give people something to think about. And if you'd like to reach out to me, it's podcast at Hallett Philanthropy.com.
We live in a world where there's a lot of people, and this is where philanthropy, nonprofits, the work that you do, we're at our best because we're nimble enough to help people. The things in our community, the families, the organizations, whatever it might be, we help them serve a greater purpose.
That whole between for-profit because they do things for money. That's okay. I'm a for-profit business. We should. And the government, because it's not very efficient at times. The government—there's a hole. And that's where philanthropy and nonprofits are at their best. That's where you serve. And by doing so, you're making a difference.
Back to my favorite saying: some people make things happen. Some people watch things happen. Then there are those who wondered what happened. You're someone who makes things happen. For those who are wondering what happened. Pretty cool way to spend every day.
I think we get rich in this profession. Maybe not monetarily for some of us, but we get rich nevertheless because we're making a difference in people's lives. Pretty cool way to spend every day.
I look forward to seeing you the next time, right back here on the next edition of Around with Randall. Don't forget. Make it a great day.