DENVER -- Maybe you already work for endowments and foundations, or perhaps it is a market that you would like to explore.

Either way, you should know about the 'Ringelmann effect,' said William Goslee, head of sales and marketing, and Alan Lenahan, managing principal, at Fund Evaluation Group LLC in Cincinnati, who spoke Thursday at a session titled "Growth Opportunities with Endowments and Foundations" at the Schwab Impact conference here.

Discovered in 1913 by French agricultural engineer Maximilien Ringelmann, the Ringelmann effect is the tendency for a group's individual members to put in less and less effort as the group grows larger.

"You can see it in a tug-of-war contest," Lenahan said.

"Give one person one end of a rope and another person the other end and tell them to pull, and they'll both pull hard. But if you put five people on each end of the rope, none of them will exert the same effort that they would if they were by themselves," Lenahan said.

"It's a social laziness," he said. "Knowing that other people are involved means that people put less effort in."

The Ringelmann effect goes a long way toward explaining the behavior of the committees that typically make decisions at endowments and foundations.

"A foundation or endowment committee can contain as many as 12 to 18 people, meeting three or four times a year to try and make decisions to govern and manage the funds," Lenahan said. "That's a lot to ask of a volunteer."

An average committee has eight members, Lenahan said.

Of those members, 4.2 are investment professionals, 2.7 have experience with alternative strategies, 4.3 are alumni/ae of the educational institution whose endowment it is, and 1.6 are full-time staff members of the foundation or endowment.

"Some are very sophisticated, and others have no clue what a stock is," Lenahan said.

In keeping with the Ringelmann effect, most committees seek consensus, and few members are willing to take assertive leadership roles.

"You can take individuals who are aggressive about investing, put them in an agent role, and suddenly they are much more conservative, even though they are not personally at much risk," Lenahan said.

The results often include decisions made based on comfort or reputation, investment slippage, delays, inappropriate decisions and a lack of accountability, he said.

"It can take committees a long time to get comfortable with an idea," Lenahan said, recalling an endowment client that took two years to warm to a decision. "There's a lack of clarity about who is finally in charge."

If you want to help foundations manage their funds, Goslee and Lenahan recommend:

1. Emphasize your experience with similar clients and the breadth of services you can offer. "It's not all about the investment portfolio," Goslee said. "Experience with similar clients, referrals, reputation and depth of services count for much more."

2. Have patience. "A lot of time goes into the sales cycle," Goslee said. "It might be years between the first contact and a final decision about who gets the business." An endowment or foundation might ask 10 or 15 companies for proposals, so "if you're average, you have a less than 10% chance that of getting the business. Or to put it another way, you will have to do 10 to 15 proposals in order to get one acceptance." Proposals are typically lengthy and exhaustive -- Goslee called them "much more like a physical exam than a blood pressure check" -- and not everyone has the resources or desire to do them over and over. "Three of our team members do nothing but put together request for proposal responses," he said.

3. Demonstrate flexibility. A final presentation can take anywhere from 15 minutes to most of a day, Goslee said. "We went to a final presentation in Minnesota and spent four hours there, plus dinner, which we paid for, and then we lost. You have to be ready for anything." Remember, too, that final presentations are more about chemistry and fit than your ability to do the work. "There are a lot of non-investment things involved when you get to that level," Goslee said.

4. Maintain a proactive, service-oriented attitude. "Committees expect you to educate them," Goslee said.

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