Leo Tolstoy began his classic novel Anna Karenina with this memorable line: “All happy families are alike: each unhappy family is unhappy in its own way.” The gist seems to be that there are a few, essential attributes that all happy and successful families share, but countless reasons why families fail and become unhappy. For wealthy families, in particular, family philanthropy may be one of the essential attributes contributing to family happiness and success. Let’s explore how families can use philanthropy to strengthen intra-family communications, foster common family values and engage the younger generations in family wealth discussions and decision making.
Communication-Building Exercise
Whatever shape a family’s philanthropy actually takes, the conversations relating to it can be leveraged as a communication-building exercise among family members. Communication difficulties among family members can often be a source of discord and conflict, especially when conversations involve topics of family wealth management. Philanthropic discussions, however, tend to be “softer” than most other family wealth management conversations because the decisions made entail less personal risk, and family members generally share a unity of purpose to make the world a better place according to their family values. When each family member understands the importance of philanthropy to the family and wants to learn more and contribute, it puts them all on equal footing. There may still be differences of opinion among family members. But, when all family members are working towards a common philanthropic goal and come to the discussion as equals, they’re not pigeonholed by existing family dynamics, and the tone of the conversation needn’t be contentious.
The goals of family philanthropy discussions are to gain acceptance and buy-in from both the younger generation and, maybe more importantly, from the older generation, as new ideas can lead to change and disruption of the status quo. Conversations are most effective when scheduled at a time convenient for all family members to meet in person. An advisor or trusted friend could attend the meeting to act as a buffer and help diffuse any potential tensions.
As a matter of good practice, families should set realistic expectations before beginning a discussion and be prepared to listen without judgment. These discussions require thoughtful and careful consideration, should be courteous in nature and be respectful of all participants. Acknowledging that each generation is at a different life stage both personally and professionally is foundational to this conversation. Each generation has a different knowledge base and perspective on philanthropy. Recognizing these as differences and not deficiencies can set the tone for an open dialogue.
When family members speak openly about the family’s shared values and what distinguishes their family from other families, it can help clarify areas or causes that are important to them, how they define success and the communities and regions that they want to focus on. Storytelling can be a very effective and powerful tool for all generations to share experiences and motivations supporting their philanthropies, even if younger family members have limited life experiences. If the family is already giving in some capacity, a discussion relating to the family philanthropy’s track record is also advisable. Using this time to brainstorm new ideas and areas of interest can help families define or refine the legacy and mission of their philanthropy, forming the basis for giving and investment guidelines.
It’s important for family members to reach consensus on governance. The younger generation should be encouraged to provide its input on the decision-making process, including the types of decisions necessary, who’s responsible for those decisions and the latitude allowed to make them. Family members should also agree on how involved each family member will be, as well as that individual’s expected time commitment and availability. Obviously, family philanthropy discussions evolve as family life progresses. Things may not—and most likely won’t—go as planned during any particular conversation, but there will always be another conversation ahead, and thoughtful reflection by participants in an unsuccessful conversation can help guide and focus everyone for the next meeting.
Finally, family philanthropy discussions can provide a useful gateway to engage family members in broader, and possibly more contentious, wealth discussions pertaining to estate planning, family governance and wealth transfer. Consider, then, a baby-steps approach to tackling difficult discussions, with family philanthropy conversations providing the basis for some of those initial baby steps.
Foster Common Family Values
Family philanthropy often helps build stronger and more harmonious families because it fosters common family values. Families that are unified by core values and engaged in a coherent giving strategy to implement those values also tend to be more harmonious and less fractious. Family philanthropy can be a kind of balm for the family soul.
Identifying common family values helps families to define their legacy and inform the mission statement for the family philanthropy, especially for families just beginning their philanthropic journey. Families know they want to be philanthropic or give back, but they might feel overwhelmed and unsure where to begin. Identifying common family values can help provide a framework for a more focused approach to philanthropy. This exercise is not only for families just beginning their philanthropic journey but also for families at an inflection point in their philanthropy; it can be helpful for thinking about new philanthropic initiatives and engaging the next generation (next gen).
A shared mission among family members creates more incentive for active involvement by all family members. The more the mission personally resonates with a family member, the more likely she’ll want to be actively involved and participate. It can be highly rewarding for an entire family to use its common value system to promote the greater good of society. A focused approach to philanthropy will typically yield greater impact, as it allows the family to go deeper or stay longer in a specific initiative, rather than spreading resources among many initiatives.
So, how do family members identify common family values? Finding that common thread that binds the family isn’t always easy or readily apparent, and there’s no guarantee that a family will ultimately find common ground. In the end, if necessary, families can agree to disagree as a way to move forward, with each family unit supporting a separate initiative. As a way to deepen the conversation, below are some topics for all generations to think about to stimulate active dialogue among all family members to help find common ground.
• Share some formative experiences in your life and how they shaped you;
• Name two or three individuals who’ve been strong influences in your life and why;
• Explain what motivates your philanthropy or why it’s important to you;
• Identify a few of your core values or beliefs;
• Describe how your family differs from other families;
• Determine whether and how impact investing, board service, volunteering or other efforts can supplement granting efforts;
• Identify the focus areas (for example, education, art and environment) or geographic regions in which you would like to make an impact;
• Describe what philanthropic success looks like; and
• Share the level of engagement and time that you can commit to philanthropy.
The answers to these questions will most likely change over time. Accordingly, this is a good exercise to repeat every five years, to ensure the family’s philanthropic mission still aligns with its values.
Engaging the Next Gen
Family philanthropy is the “glue” that binds a family in its shared beliefs and values, but as a family grows and diffuses over time, those beliefs and values can become less shared by family members. So, how do families retain their original cohesion to create a lasting philanthropic legacy?
The Rockefellers
Perhaps the most widely recognized family that’s successfully grown its philanthropic legacy across multiple generations is the Rockefellers. Generations of Rockefellers have worked together to establish family foundations beginning with the Rockefeller Foundation established in 1913 by first and second generation Rockefellers. In 1940, third generation Rockefellers established the Rockefeller Brothers Fund. Third and fourth generations of Rockefellers established the Rockefeller Family Fund in 1967. In addition to these principal philanthropies founded by members of the Rockefeller family, many other family members have created organizations to advance various causes. A fifth generation Rockefeller co-founded a youth-engagement initiative in 2004 and, in 2013, co-founded a member network to inspire families to make more impact investments.1
Benefits
The Rockefeller family communicated the importance of philanthropy through the generations and allowed each generation to engage in a way that’s meaningful to them. In the same vein, according to the National Center for Family Philanthropy, “the best family philanthropy happens when every generation has a seat at the table.”2 When that occurs, not only is the philanthropy positively impacted, but also the family itself can reap the following benefits:
• Develop deeper ties through giving and philanthropy;
• Learn to work more effectively with individuals of different ages, beliefs and experiences developing skills in collaboration, compromise and shared decision making;
• Have young people bring older family members up to speed on new technology, media and communication; and
• Encourage the next gen to become an advocate for philanthropy and generosity.
Because each family is unique, there’s no one-size-fits-all approach to engaging younger family members in philanthropy. It’s important to understand both older and younger generations’ wants, needs and aspirations. Families should also ensure they assess younger family members’ personalities, skills and experiences to create the right learning opportunity for them specifically.
Proven Methods
Families who’ve successfully handed over their philanthropy to the next gen started with some of the below methods:3
1. Professional development. Access to conferences, workshops, peer groups and network events helps guide the new generation in their professional development within the non-profit sector. Serving on a board of a nonprofit provides valuable training and helps the next gen see things from another perspective. Internships, mentorships and scholarships to attend a university philanthropy program are also wonderful professional development tools.
2. Discretionary grant program. A family allocates a sum of money to next gen family member(s) for either their individual grantmaking or in collaboration with each other. This tactic allows the next gen to research initiatives they care about and develop necessary skills to understand grantmaking and the non-profit sector. It also gives them the autonomy to support initiatives that may be outside the scope of the family mission and, in a collaborative context, it teaches them how to work together to pool and allocate resources.
3. Grant matching program. Under this model, a family foundation matches any donation made to a nonprofit by next gen family members. Such a program may also promote family volunteerism. For example, for every portion of volunteer time by a family member with a nonprofit, the family foundation donates a selected monetary amount to the nonprofit, matching the volunteer hours to the dollars given.
4. Observing member. As an observer without voting rights, a next gen family member may be offered a seat on the foundation’s board or advisory committee. This opportunity allows the family member to observe the board/committee in action, provides her with the opportunity to contribute to the board/committee discussions and serves as a stepping stone towards full voting participation on a board/committee.
5. Junior board. With several younger family members to engage, setting up a grant-making board that operates separately from the foundation board or granting committee of the board is a good way to cultivate the new generation. They’re typically given a modest amount of funds to allocate and can be supervised by a current board member or self-governed. This method encourages collaboration and instills sound governance practices.
6. Practical experience. Participation in occupational training programs of a family foundation or site visits to family-supported nonprofits give the next gen the opportunity to work alongside foundation staff. This hands-on experience helps the next gen to understand programs supported by the family’s philanthropy and learn internal foundation operations.
Final Thoughts
Family philanthropy can provide a ready means to engage younger generations in family wealth discussions and decision making. For many wealthy families, philanthropy provides an excellent opportunity to prepare the next gen to succeed. When a family strategically plans and runs its philanthropy like a business venture, it can provide a low risk environment for the next gen to learn and grow. Younger family members who are involved in the family foundation may develop skills in asset management, governance and programmatic operations and gain a clearer sense of their own philanthropic interests.
The benefits of engaging the next gen in philanthropy can have a larger impact on overall family succession planning. The guidelines and tactics around the philanthropic discussion translate easily into discussions about wealth transfer and family business succession. Opening a communication channel among generations can only benefit the larger family planning discussions going forward.
Philanthropy in and of itself can be very rewarding to those involved. When an entire family is engaged in philanthropy, it creates an opportunity to enrich the lives of all family members, both individually and collectively. Not only can family philanthropy be a wonderful way to bring busy family members together for collaboration and discussions but also may bring them closer as family, just as Tolstoy might envision.
Endnotes
1. “Rockefeller Philanthropy: A Selected Guide,” Rockefeller Archive Center (2011).
2. Kylie Musolf and Danielle LaJoie,“Opportunity of a Lifetime 2.0: Multigenerational Family Philanthropy,” National Center for Family Philanthropy (2017).
3. Ibid.