Individuals and families have good intentions when giving assets to charity. They want to share their resources, make a positive impact on their community and share their values with the rising generations through their philanthropic work.
But often, for a philanthropic program to be lasting, charitable giving alone is simply not enough to promote generational engagement and cause meaningful community impact. It requires focus and commitment to build something that carries into future generations. Building out the framework, engaging in the ongoing maintenance and periodically evaluating the impact of the philanthropic plan to evaluate what is working and what needs to change, requires added thought and effort.
In these ways, family philanthropy is like a small business, and like any business, you need plans for operations, how to include others to further your success and succession.
Keep your charitable legacy growing from generation to generation
When done well, philanthropy can be a bridge to bring individuals together around a common goal. It can communicate values and develop a sense of social responsibility across generations. The challenge, however, lies in the construction of that metaphorical bridge.
The strongest bridges are built by establishing a process-driven approach to your giving.
In the words of Andrew Carnegie, “It is more difficult to give money away intelligently than to earn it in the first place.” As that suggests, implementing thoughtful strategies to evaluate and improve your giving practices is a responsibility and challenge each donor faces.
Let’s take a look at one example of a family’s challenge and then review the seven ways we can help you and your family implement a process-driven approach to your philanthropy.
How one family office found success
This family considered themselves close-knit. The first generation immigrated to the United States and started a real estate business, which the second generation expanded and grew into a multi-million-dollar company spanning multiple states. Together, the two generations have experienced both poverty and enormous wealth. They have similar values and have shared many of the same experiences.
The third generation was raised similarly to the second generation — prioritizing hard work, family traditions and discipline. However, the parents and grandparents had not yet given much attention to including them in discussions about the family business.
The family philanthropy
This dynamic carried across to the family’s philanthropic work. The family foundation, founded by the first two generations, was intended to be passed along to the third generation and beyond. The oldest generation was leading the foundation at the beginning stages, while the next generation was more focused on building the family business.
They engaged in a scattershot giving philosophy, giving as many gifts as possible to as many “good” causes as possible. There was no formal process for grantmaking and no follow-up with grantees about results and progress. This led to the family foundation giving many small gifts each year to the same handful of charities.
Eventually, the second generation decided to become more engaged. They evaluated the current charities and worked on better understanding the needs of the community. This led to the distribution of fewer gifts in larger amounts to those charities that were doing work that aligned more closely with the foundation’s mission.
Inviting the third generation to the table
As the first generation was nearing their 80s, some of the older grandchildren, having just entered the workforce outside the family business, expressed interest in the family business. This inquiry prompted the first and second generations to invite the third generation into the family’s philanthropic work as a first step.
The first meeting of the family had several mishaps. There was communication breakdown and a large gap on private foundation education between the older and younger generations. Likewise, there were some challenges around breaking the silence on the family’s wealth. After a few unfortunate outcomes due to poor planning around how to integrate the younger generation, the family was ready for some philanthropic advisory and support.
Bringing it all together
Philanthropic advisors can assist individuals, families and other philanthropically focused groups with role clarity, responsibility sharing, communication and the appropriate dissemination of information. Successful outcomes are most often achieved with thoughtful advance planning and preparation. With the right perspective and experience on your side, you can create an effective process to carry your philanthropic work through future generations.
Now let’s dive into the steps to improve your family philanthropy to set you up for long-term success. These steps are also how we would have guided the family example above to avoid some of the communication, grantmaking and succession challenges they initially faced.
Step 1: Unlock your values and find your focus areas
Engage in a series of values-sharing discussions to explore motivations and purpose for charitable giving. These discussions should occur early and often, with consideration given to involving the rising generations when they are old enough to understand the subject matter. Once values are unlocked, they will provide the anchor for decision-making in the following steps of the process. Often the most impactful way to organize your philanthropy is to focus on select, specific issues, rather than giving across many focus areas.
Step 2: Determine how to involve others
Take time to think about the who, what, when, where and how to involve others.
Participation can take many forms, from a voice in decision-making, to ownership of a specific task or project, to preparing for eventual succession. Before engaging your family or other individuals, it can be helpful to explore what types of involvement are meaningful to you, and how others’ talents, strengths and interests can contribute to or detract from your philanthropic success.
Step 3: Set a family budget
Allocating specific amounts to an annual philanthropic budget helps to avoid reactive giving. Likewise, being proactive in your giving allows you to give enough attention and funding to the focus areas you care about most.
A review of previous contributions can help you understand your giving distribution across selected causes and the total amount allocated. With this holistic view, you can consider adjustments to make your giving more proactive and inclusive.
Step 4: Structure giving for your needs
There are many ways to structure your giving, especially as you continue to include multiple generations, perspectives and values in your family philanthropy. For example, if you have cross-border giving interests, while your private foundation can donate to international entities, if it is US-based, it must first navigate legal and regulatory considerations. In the alternative, you might wish to consider establishing an international donor advised fund or perhaps an endowment fund within an organization that specializes in the geographic area you want to help. While you can likely achieve your philanthropic objectives through any vehicle, the goal is to ensure you select the vehicle or combination of vehicles that aligns with your goals.
Step 5: Find and vet partners
While the task can seem daunting, understanding the “why” and “how” behind finding your nonprofit partners will help you and your rising generations achieve more meaningful results within the philanthropic projects it funds. For instance, if you leverage local partnerships within the geographic region of your giving, whether nationally or internationally, you can tap into their knowledge in that area, gaining insight from residents and professionals about community needs. This information can lead to enhanced effectiveness and greater positive impact in your giving. This leads into the final two steps….
Step 6: Evaluate and measure impact of grantmaking
Research shows the rising generation cares deeply about the short and long-term impacts of their grantmaking. Understanding how to evaluate projects will set your philanthropy up for success while encouraging the rising generations to be more proactive in their involvement.
Grantmaking is evaluated by assessing the alignment of funded projects and their outcomes alongside your goals. This involves both qualitative and quantitative analysis of program effectiveness, financial resources and stakeholder feedback.
The most effective way to create meaningful change is to set clear goals, determine objectives and measure your progress. Keeping a rhythm in your evaluation process is key, yet it is also where one of the major challenges in continuity lies.
Step 7: Monitor progress and repeat steps when necessary
Any group will find themselves in a rut when the reason for how they operate is: “That’s the way it has always been done.” The challenge is to fight complacency and create accountability. Annual reviews are one way to monitor progress and make adjustments. Keep these reviews fun and interactive by hosting them in the different geographic locations you serve so you, your family, and the rising generations can experience the communities you are helping, while also engaging in thoughtful boardroom dialogue.
While many families and individuals want their philanthropic efforts to be impactful, it doesn’t happen effortlessly. It requires thought, communication and a desire to share your values with others over time. By following these seven steps, you can create a lasting philanthropic program that carries on for multiple generations.
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