A School Money Can’t Buy

The price to buy nothing has gone up over the last 10 years, and an exclusive group of donors is very interested in finding out what the next 10 will bring.

In the fall of 2007, the University of Wisconsin Madison announced an unusual naming partnership for its business school. A group of 13 donors made gifts totaling $85 million. In exchange, the Wisconsin School of Business would not change its name for a period of at least 20 years.

Many universities try to name their business schools for a single major donor -- they don't leave them unnamed by a group. Wisconsin’s announcement also stood out because it came at a time of significant business school naming, a few years after the University of Michigan’s business school received $100 million from alumnus Stephen M. Ross in 2004 and subsequently renamed itself the Ross School of Business, and the year before the University of Chicago received $300 million from alumnus David Booth and decided to rechristen its school the Booth School of Business.

As a result, the Wisconsin arrangement grabbed attention across higher education, economics and fund-raising circles. Terry Hartle, the American Council on Education senior vice president, called it the most interesting development in philanthropy he’d seen that year. The Freakonomics blog posted what was perhaps the pithiest analysis: “$85 Million Will Buy You Nothing at the University of Wisconsin.”

In that post, economist Steven D. Levitt wrote that “it probably would have been a lot cheaper for the boosters just to bribe the Wisconsin Legislature to pass a bill preventing the naming of the business school, although that strategy would not have gotten them many positive headlines.”

The Wisconsin Naming Partnership has added a few donors since 2007. It’s up to 17 partners and has raised $110 million. But the term of the nonnaming agreement hasn’t been extended -- so now $110 million will still buy you nothing at the University of Wisconsin.

As the partnership is approaching its midway point, Wisconsin administrators and donors are thinking about how it came together, how it has worked and what might lie in its future. Some early chatter is beginning about whether donations could be accepted to push back the partnership’s ending date.

The discussion opens a window into the world of higher education fund-raising, valuation for naming rights and a university’s identity. It will also be watched with interest by fund-raisers, who even a decade later view the deal as an innovative idea that regrettably hasn’t been replicated elsewhere.

What’s in a Naming Partner?

Michael Knetter is the president and CEO of the University of Wisconsin Foundation. Previously, he was the dean of the Wisconsin School of Business, and he spearheaded the development of the naming partnership.

In the early 2000s, the University of Wisconsin was one of only a few Big 10 institutions without a named business school, Knetter said. When he started as dean, he began to examine the possibility of naming the school if a major donor could be found.

Internal analyses determined that such a naming agreement should bring in a donation of about $50 million, Knetter said. He started to have conversations with deep-pocketed donors, but those conversations take time. And during that time, Knetter started to question the idea of renaming the school.

“I felt a little bit uncomfortable thinking that one person’s name would somehow define the school’s brand forever,” Knetter said. “These school namings are usually in perpetuity.”

At the same time, naming prices seemed to be going up rapidly. Rather than risk jumping into the fray at the wrong time, Knetter thought it might make more sense to wait -- or to not name the school. As he talked with different donors, alumni and stakeholders, he became less and less sure renaming the school was the right way to go.

“It doesn’t really often work out that the brand that a business school gets through naming has greater value than the parent brand,” Knetter said. “Our parent brand was really extraordinary. And Wisconsin, I would say, has an ethos of egalitarianism about it that made me uncomfortable and I think made others uncomfortable. How would the business school be viewed on campus if we somehow tried to rebrand ourselves in a way that almost separated us, or distanced us, from the parent brand?”

Knetter came up with an alternative: preserve the name of the school for a finite period of time. Do it through a collective gift.

The idea aligns with three of the most important financial ideas taught in business school, according to Knetter. First, preserving future options can be valuable. Second, brand equity is valuable. Third, teamwork is important.

Knetter set about seeking donations totaling $50 million for the idea. The first $20 million to $30 million happened relatively quickly. Then he hit a long slow period. But after talks with some influential donors, donors bought in for well over $50 million in total. The partnership was announced at the end of October 2007, about two years after the first donors signed on.

Those involved said the idea seemed to fit the University of Wisconsin and its business school. The university and its business school are large and have many alumni, but they don’t necessarily have access to the same number of super-rich donors as do the country’s most elite institutions. The minimum donation amount for Wisconsin Naming Partners was $5 million in unrestricted money, and donors could put designations on money above that level. That allowed more donors to give relatively small amounts of money for a naming deal, rather than one mega donor giving a larger chunk in the $50 million range.

“No way I could have done that,” said Wade Fetzer III, a retired Goldman Sachs partner who has chaired the University of Wisconsin Foundation Board of Directors and co-chaired a university capital campaign. “And, in a sense, by subdividing or syndicating, that was the tool that allowed Mike to raise this amount of money.”

The funding was also notable because it was largely unrestricted.

“Particularly at Wisconsin but probably in most capital campaigns, probably 90 percent of the dollars are designated,” Fetzer said. “So, in a sense, this is consistent because it’s designated to the business school. But it’s still unrestricted.”

‘Hopefully the Money Is Gone’

The School of Business estimates that the naming partnership has funded about 10 percent to 15 percent of its annual budget, which totaled just under $68 million last year. The partnership has funded an average of 12.5 full-time faculty members annually, plus scholarships for Ph.D. and M.B.A. students. It has allowed the school to invest in programs and grow undergraduate enrollment from 1,362 in the fall of 2007 to 2,540 in the fall of 2016.

One important condition attached to the money is that it should not be treated like an endowment, said John J. Oros (at right), a naming partner who is the managing director at the private equity firm J. C. Flowers & Co. LLC and a former chair of the University of Wisconsin Foundation. It is intended to be spent in its entirety over 20 years.

“Hopefully all this money is gone, both principal and interest,” Oros said. “It maximizes the impact to the school in this 20-year period in which we’re taking the name off the market.”

The naming partners like to meet about once a year, Oros said. They typically talk about other university projects and fund-raising needs. They also serve as a sounding board for administrators.

“We were asked things like if we want to be on some sort of board of overseers, and we said no, we’d like to meet and golf once a year or have a nice dinner, and we’d like you to update us and share our opinions on some things,” Oros said. “The last thing we want to do is have bought control of the business school among 20 fat cats.”

In a few cases, donors have joined the group. One of those cases came when Knetter moved from business school dean to lead the university’s foundation. Donors raised $5 million for him, making him an honorary naming partner.

But the new additions did not extend the time frame for the naming partnership. That option could be on the table in the future. Most say that major decisions about the program are still a few years away, but it’s clear the 10-year anniversary has spurred some thoughts about the future.

“I think we said around the end of the 10th year we would let people think about buying more time off the market,” Oros said. “In the beginning, we worried a lot about how we were going to handle the transition from this 20 years to the next. Now, we think it’s probably in the last five years when we’re going to get organized.”

The business school has a new incoming dean, Anne P. Massey (at left), who could very well be at the helm as some of those decisions are made. Massey starts in August, taking over from François Ortalo-Magné, who is leaving to become dean of the London Business School.

Massey is still learning the intricacies of the naming partnership and reaching out to its different donors. She’s focused on mapping out opportunities for the school of business at a time of massive change in higher education and shifting student expectations.

Eventually, though, she knows talk will turn to the future of the naming partnership. She’s not willing to commit to a course of action yet, declining to rule out options from continuing the partnership as is, to reconfiguring it or moving the school to a new, permanent name.

“I think, from discussions, everyone is very happy with the naming gifts,” she said. “It may well continue to expand, bring other people on board. At the same time, we’re always stepping back and saying, ‘Should we be doing something differently?’ That’s a good conversation.”

Future Values

At the core of discussions about the partnership’s future is the ever-changing question of the value of a name. When leaders and donors had such discussions in the past, they talked about how well-known a donor needed to be -- or how much he or she needed to give -- to make renaming the school worthwhile.

They’re likely to have those conversations in the future. They’re also likely to have discussions about the length of any naming deal.

Colleges and universities have been increasingly moving toward trying to limit the length of naming deals. They’ve had some success with buildings, but schools still tend to be named in perpetuity.

For the last decade or so, universities have been working harder to leverage their opportunities when naming schools or buildings, said Tim Winkler, CEO of the Winkler Group, a fund-raising consulting group for nonprofit organizations, schools and institutions of higher education. In many cases, that comes after institutions years ago permanently named buildings after donors -- and then watched, unable to negotiate new deals, as other colleges and universities brought in larger and larger naming donations as market conditions changed.

The Wisconsin School of Business has managed to put itself in position to take advantage of future inflation in naming gifts, Winkler said.

“You can’t fault the university,” he said. “They’re trying to raise money and use any legitimate means possible.”

Fund-raising professionals often wish the Wisconsin Naming Partnership could be replicated elsewhere. But so far, they have been unable to do so.

“I really think it’s a creative and wonderful gift,” said Martin Grenzebach, the chairman of Grenzebach Glier and Associates, a philanthropy consulting firm that serves nonprofit and higher education sectors. “It would be nice if we could replicate it at other places, but it hasn’t happened yet.”

Colleges and universities that are naming buildings and schools today are likely to look at the deals in 10 years and believe they were a bargain for donors, Grenzebach said.

The naming partnership’s donors offered several ideas that might explain why their naming deal hasn’t been duplicated. Announcing the decision to forgo a name can be riskier than it sounds, they said. Leaders have to evaluate whether the move will be viewed as a dedication to the school’s current identity, which would theoretically boost its prestige, or whether it will be considered an admission that they were unable to raise a substantial sum of money, which could hurt the school’s standing.

Also, there are relatively few business schools left that aren’t named after donors and famous alumni, cutting the number of candidates. Some mentioned the Stanford University Graduate School of Business as one of the few schools that has not been named after an individual. But an associate dean of development there told the Chicago Tribune in 2008 that the Stanford brand is sacred. Harvard University has also historically eschewed naming schools after donors, but it changed course with its public health school last year after a $350 million gift -- leading to debate about whether its medical school should be next.

The idea of brand and identity was also cited by Wisconsin boosters. The University of Wisconsin and its business school have a special identity, they said. It doesn’t mesh with the idea of being named after one person. Oros, one of the naming partners, pointed to a sense of camaraderie and jokingly suggested it is because plenty of beer is brewed in Wisconsin.

Of course, donors also acknowledged that every institution ascribes to a set of high moral principles and believes itself to be unique. And it should be noted that the Wisconsin School of Business is located in a building, Grainger Hall, that is named after businessman and donor David Grainger.

Oros said the school may have been able to forgo a name in part because it was so particular about finding the right name.

“I think it was our lack of success at finding a naming partner that led us to this as a better way forward,” Oros said. “We were so fussy about getting enough money if we ever did it, and doing it with the right name, that we never did it.”

Knetter, the university foundation president and former business school dean who crafted the partnership, said he thinks there was some value to being the first school to announce a nonnaming agreement.

Knetter also believes the deal will be renewed in 10 years. Yet he admits such a move could require unique circumstances.

“Nobody else has done this since then, and that doesn’t necessarily mean that nobody’s tried,” he said. “But it may not be as easy to do the second time. People have to trust and feel like it’s the right thing. And that trust was something I’ll never forget.”