Engaging the Next Generation in Family Philanthropy: Getting Started by Gioia Perugini

In a recent webinar hosted by the Family Office Exchange, my colleague Nancy Gardiner and I presented on the topic of engaging the next generation in family philanthropy. This is an area we address almost daily in our practice, fielding questions from clients about what the right time is to engage their children or grandchildren in the practice of the family’s philanthropy, how to get started, and what they should do to get the next generation “ready.”

Room for Growth as Foundations Age and Mature

We know from the National Center for Family Philanthropy’s 2015 trends survey that nearly 70% of family foundations were created after 1990 – so they are still relatively “young” entities. Two thirds of family foundations still have founding donors actively involved, with fewer than 10 percent of foundation boards comprised of a majority of third- and fourth-generation family members.

As the age of the foundation increases, the number of third- and fourth-generation family board members will increase accordingly, so we can see that this generational change in leadership is coming to family foundations.

While the NCFP study also tells us that 56% of family foundations report engaging the next generation, as it currently stands, only 9% of foundation board members are under age 40, compared with 18% for public charities. Clearly there is room for growth here, as foundations age and mature.

Getting Started with a Needs Assessment

So given all of this, what can or should a family do to get started? We often start the conversation with a needs assessment. Just as you might start with understanding a client’s goals for investments or estate planning, we like to start with a discussion about the family’s goals in terms of size and scope of their giving “footprint.” Sometimes, this is clear; a family member has had a health event or formative experience that makes the focus of the family’s philanthropy crystallize. They might come to you already caring deeply about an issue, and having some sense of how they want to tackle it.

At other times, and frankly, more frequently, the goals are less apparent. In this case we begin by asking questions to elicit interests and potential scope. Conversations with other advisors often happen at this phase as well. The accountants and estate planners will often work together to determine how much, when, and what the best vehicle is to use for the family’s specific circumstances and financial needs. This would be the time to determine what vehicle or vehicles make most sense.

Then we can begin to address substantive questions:
• What are the issues about which you feel most strongly?
• What did your parents or grandparents value? How closely do we need to or do you want to adhere to their wishes?
• When is it appropriate to deviate?
• What is the geographical reach of your giving and how do you want to approach it (direct services, policy, advocacy, etc.)?
• How hands-on do you want to be in the process?

Defining and Developing Family Roles

After the needs assessment gives you a rough outline of your goals, we turn next to defining and developing family roles and sharing the eligibility criteria. Not to oversimplify, but it is important to clarify who will do what, both within the family and with outside advisors. As you can imagine, this part of the conversation varies, depending on the stage at which we meet the family.

Here are some of the questions we typically start with in helping families define roles: Is the founder still “in charge”? Would the family like to create a broader group of participants? Are there family members who do not want to, or should not, be part of the plan? How do spouses fit in? Are there specific eligibility requirements?

Developing clearly articulated family roles, and ensuring everyone knows them and agrees to abide by them, sets a level playing field on which to engage in shared family philanthropy.

Flexibility is Key to Engagement

How you approach this work is often as important as what you do. Maintaining flexibility is key to the success of multi-generational engagement. Given their different ages and stages, we know that different generations approach life with different outlooks. Many of us are familiar with the profiles and habits of Baby Boomers, Generation X, and Millennials, but do you know how to engage Generation Z? See our previous blog post on Igniting Generation Next for some insight.

Every generation is different. Just as every generation evolves and changes over time so does every family. The right idea is often the one for which those assembled are most ready and on which the group can agree. The “perfect” idea, if the group is not fully committed to it, will not succeed.

Stay Tuned…

We look forward to sharing more of our thoughts on this topic over the coming months. In the next installment on this topic, we will cover what you can do to get the next generation ready, including some successful activities to bring the family together and focus on their joint giving.

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