By Karen Kardos
Head of Philanthropic Advisory – North America
March 13, 2019Posted InFamily Office
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Many philanthropic foundations create impact but can achieve more. We explore how one conversation may help families maximize their potential.
People often quip how easy it must be to give away money to support charities. However, families need to be strategic in their giving if they want to create meaningful impact. This takes considerable time and effort, and is not as simple as many may initially believe.
Although each family’s approach to philanthropy is unique, families are more likely to create a lasting legacy and make a real impact if they run their philanthropy like a business venture. And like any other business venture, philanthropy requires thoughtfulness to develop and hard work to establish and run.
For many, the term ‘philanthropic foundation’ will immediately bring to mind the multi-billion dollar organizations founded by the world’s most rich and famous. But in reality, they come in all shapes and sizes. There are approximately 90,000 foundations around the world, with 80,000 of those established by individuals or families. Most of these have endowments of less than $2 billion USD.
These smaller foundations may not have the asset base of their famous peers, but the desire and ability to help humanity and promote the welfare of others is just as strong. Despite this, a large number of these foundations fail to maximize their ability to create meaningful impact for the people, causes and communities they were created to help. This is largely a personnel resource issue, as many of these foundations are typically established by a donor who has a full-time job and is unable to commit the necessary time and energy needed to run a philanthropic business venture.
As a result, many foundations have very lean operating structures and typically:
These foundations do not develop or expand, but remain in the nascent stage in their life cycle, thereby limiting their effectiveness.
Donors may be time-poor, but just one conversation could help to frame and inform their philanthropy to maximize their foundation’s impact.
Families with successful philanthropic foundations typically establish a framework to bring their mission to life. This framework structures a family’s philanthropy to give it direction and focus that will drive change and strengthen the family’s legacy.
The first – and often neglected step in this process – is for a family to sit down together and have an open and honest conversation about philanthropy. During this conversation families should come to consensus about the following five key elements of philanthropic strategic development: legacy, mission, revenue streams, giving guidelines, and investment guidelines.
Of course, this conversation is not the entire process, but it is the crucial starting point to provide the groundwork from which to grow.
Families should ensure all members are aligned in each of these areas so the entire
family feels involved, respected, and appreciated. When all family members feel part
of the process, they are more likely to commit to it, which will make it more likely
it will succeed
throughout the generations. Philanthropy must not feel like a patriarch or matriarch’s
hobby or passion and family members cannot feel forced to participate. Rather
it should feel like an entire family’s shared mission.
We have identified a number of questions families can use as a starting point during these discussions to establish their philanthropic framework and direction.
Ideally this conversation would happen at the start of a philanthropic journey, however families that are further along can still use the findings of the discussions to shape or re-shape their activities at any stage in the life cycle of philanthropy. In our next piece, we will explore the compliance and infrastructure requirements families should understand and consider when establishing their philanthropic foundations.
Legacy and mission
Current and future revenue streams