ENGAGING FAMILY MEMBERS IN PHILANTHROPY Ideas from Leading Philanthropic Advisors Presented by Foundation Source THE SILENT PARTNER BEHIND AMERICA S FOUNDATIONS
From the Desk of Douglas K. Mellinger Vice Chairman & Founder INTRODUCTION DOES YOUR FOUNDATION HAVE ACLEARLY DEFINED INTERNAL MISSION? Most foundations have an external mission to help them determine how grants will be used to make a difference for society. Just as important is the internal mission, which guides foundation activities to make a difference for the family, creating interactions that have a positive effect on individuals and the group as a whole. Much is written about the difficulty of raising responsible children in a family with wealth. I believe there is no better tool to battle the negative influences than the strategic use of a family foundation. Foundations provide unique opportunities for education, for life experiences and for family bonding that build better citizens as well as stronger families. Family foundations help individuals learn about causes and build leadership skills. They help family members learn how to express their feelings and beliefs, work through family conflict, and practice presentation skills. Foundations can be used to teach about corporate governance, budgeting limited family resources (no matter the foundation size), investing, and so much more. Through our work with hundreds of family foundations, we ve found one common thread. The spirit of engaging family members in the philanthropic enterprise can be overshadowed by the challenge of generating interest and making it happen. (over, please) 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 1
To that end, we at Foundation Source thought it would be worthwhile to bring together interesting ideas from some of the country s leading philanthropic advisors, and share those ideas with you. There are many qualified and dedicated individuals and firms out there. These represent but a few. The ideas presented in this booklet can be implemented on your own, or you may consider hiring an advisor to create a personalized program for your foundation and even serve as moderator. We hope you find this material informative and useful. Douglas K. Mellinger Vice Chairman & Founder 2
CREATIVE APPROACHES FOR FAMILY PHILANTHROPY By Ellen Remmer The Philanthropic Initiative, Inc. Here are some creative approaches and activities that other parents have found successful in practicing and promoting philanthropy with their children. As you and your children get involved, you will probably invent new rituals that have special family meaning. The Three-Part Allowance Many families find this practice useful for children of all ages. Divide your child s allowance among three jars, for spending, saving and giving. This routine will reinforce the importance of saving and giving and also will provide early practice in money management. Once or twice a year, talk with your child about the giving jar and help identify possible recipients. If your child likes animals, visit the local animal shelter or do research together on the Internet for an appropriate charity. Some parents encourage their children to hand-deliver the gift, or to add volunteer time to their financial donation. Parents of older children can provide an added incentive by offering to match the contribution. Family Rituals Around Giving Rituals around holidays are especially meaningful when they include the value of giving. This can be as simple as donating a book to the library on each family member s birthday or delivering a turkey to a homeless shelter on 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 3
Thanksgiving. Some families host an annual Christmas cookie party where everyone brings coats and warm clothing for global aid programs. Other families have created a Mother s Day tradition of doing a good deed for someone else s mother. Family Community Service Projects Volunteering together as a family is an enjoyable way to share the philanthropic spirit. These projects may start in your neighborhood, by picking up trash at the local beach or building the new school playground. Other families take their generous spirit to the broader community, by chopping vegetables at a soup kitchen or by spending weekends with their teenage children building a house in a lowincome community. You may find a volunteer opportunity through your religious organization or local community center, or you can approach one of the 500 volunteer centers around the country that specialize in matching families to service projects. Parent/Child Philanthropy Club Mother/daughter book clubs have become a popular way to deepen family bonds through the pre-teen and adolescent years. These groups build a community of parents and children, and provide young people with the opportunity to practice leadership skills. Some of these clubs have expanded into philanthropy, with everyone pooling their funds and giving the children a chance to learn about and practice charitable giving with their friends. Schools, Religious and Community Groups Parents can help their children become involved in their schools, community groups or religious institutions. In fact, a growing number of schools have started encouraging or requiring community service. Parents can play a key role in shaping those programs. Many religious institutions 4
invite young people to participate on mission trips or service projects. There are many local and national agencies that offer diverse opportunities for hands-on community service and even to serve on non-profit boards. This excerpt is reprinted with permission from Raising Children with Philanthropic Values. The complete paper is available on TPI s website at: http://www.tpi.org /promoting/ publications/ raising _children_2003.pdf TPI, a 15-year-old nonprofit organization, works with individual donors, family foundations and corporations to make their giving more effective and meaningful. TPI also promotes strategic philanthropy through research, publications and donor education programs. Contact Information Ellen Remmer The Philanthropic Initiative, Inc. 77 Franklin Street Boston, MA 02110 617-338-2590 get2us@tpi.org www.tpi.org WHAT S ADONOR TO DO? TYPICAL PRACTICES OF FAMILY FOUNDATIONS FOR ENGAGING NEXT GENERATION TRUSTEES By Tim Walter, CEO Association of Small Foundations Every year, the Association of Small Foundations surveys its 2,900 members on operations and management practices. About two-thirds of our member foundations are family foundations, and of those, only 25% have paid professional staff. 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 5
We asked our family foundation members what they do to prepare younger or next generation family members for being involved in the work of the foundation. Next generation can mean people of any age, from young children through folks in their 60 s! Of those who do engage the next generation trustees in activities, ASF members cited the following: 58% Family meetings & retreats 27% Site visits to grantees 19% Attending conferences & seminars 17% Allowing discretionary grants 16% Junior boards 09% Advisory committees 06% Matching gifts program About 45% of the family foundations noted that they don t operate a formal or standard orientation program for new trustees. Instead, they focus the orientation of the younger generation specifically to the interests and needs of the individuals involved. Another important highlight of our 2003 Foundation Operations and Management Survey is the difference between family and independent foundations when it comes to initial founding issues that can greatly influence next generation involvement. In general, we see family foundations leaning toward broader grantmaking guidelines, being more open to change, and less concerned with perpetuity in contrast to independent foundations. 6
Mission Tendencies and Openness To Change (In Independent and Family Foundations) Independent Foundations Family Foundations Sharply focused grantmaking Change discouraged Perpetuity a priority Broad grant guidelines Change encouraged Perpetuity optional Family foundations offer a much higher degree of flexibility in setting the grantmaking mission of the foundation than do independent foundations. Twice as many independent foundations as family foundations say it is difficult to change the mission or specific priorities of their foundations. If you imagine a continuum that ranges from mission and guidelines being set in stone at one end, to having maximum latitude and flexibility to change at the other end, roughly two-thirds of independents are grouped in the more restrictive side, and two-thirds of family foundations are grouped towards flexibility. However, very few boards of either type feel that change of mission or guidelines is encouraged. It is also logical that attitudes toward perpetuity would vary. This is not to say that perpetuity is not important to some family foundations, but perhaps perpetuity is subordinate to other priorities. Or, we might imagine that the donors either assume the family will continue, or perhaps they realize families sometimes do dissolve or die off. Either way, we can see they d be less likely to include a command for perpetuity in the foundation s formational documents. For more survey results on perpetuity, family foundations, and younger generation involvement, see ASF s 2003 Foundation Operations and Management Survey. It contains 40 pages of results on foundation operations ranging 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 7
from board compensation to grantmaking practices. Call ASF at 888-212-9922 and mention this Foundation Source booklet to receive the 2003 report at a special discount rate of $49. We ll also include a copy of the 2002 report at no additional cost. The Association of Small Foundations, formed in 1995, seeks to build and strengthen small foundation philanthropy by providing quality programs, products, and services to foundations with few or no staff. Annual membership is $400 and is open to all private grantmaking foundations which make grants annually to more than one organization or individual. Our members represent all 50 states, and have assets ranging from $100,000 to over $750 million. Contact Information Tim Walter Association of Small Foundations 4905 Del Ray Avenue, Suite 308 Bethesda, MD 20814 888-212-9922 tim@smallfoundations.org www.smallfoundations.org NONPROFIT SURVIVOR: ADOSE OF REALITY FOR FOUNDATION BOARDS By Ann Shulman & Stephen Colwell Philanthropy Associates General Description: This is a fun activity that gives family members insight into the different ways that other individuals evaluate, prioritize and make decisions about potential grantees. This activity can be designed to take as little as 15 minutes or can take over an hour, depending upon the size of the group and the desired depth of discussion. 8
People Involved: One neutral facilitator: An outside advisor or a designated Board or staff member. Participants: As many family members as possible. This activity can be conducted with a mixture of board members and non-board family members, or just with non-board family members. Description: 1. Before the session, the facilitator puts together a peer group of four to six nonprofits, and uses GuideStar.org or other sources to prepare a short description of each nonprofit. Generally, it is best to select nonprofits that would not be funded directly by the foundation, but that work on issues that the family members would be comfortable discussing. For example, a foundation that funds only in Florida might look at a peer group of nonprofits that work in California. 2. 3. The participants are told that only one of the nonprofit organizations will get funding, and that their job is to select the nonprofit Survivor. Each participant reviews the description of the peer group of organizations (everyone gets the same information), and writes down a secret ballot to eliminate one of the nonprofits. The facilitator then counts the ballots and announces the nonprofit that must leave the island. The facilitator then invites comments from the participants as to why they voted to eliminate one nonprofit rather than the others. This process continues until there is only one nonprofit left. At this point, the facilitator shifts the discussion to focus on the way the decisions were made, rather than the nonprofits themselves. The focus is on the surprises encountered and insights gained from listening to the other participants, rather than whether the right decision was made. 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 9
Value of Activity / Lessons Learned: This activity can be used as an icebreaker or as a vehicle to encourage more in-depth discussion about decision-making. It provides a relatively risk-free environment for family members to learn about the way that others process and evaluate information, and ultimately make decisions. It allows people who might not speak out in a real Board discussion to participate. It also allows participants to see where other family members might have strengths (such as in analysis of financial statements or taking notice of small details) that they themselves do not have. It can be used to create a friendly, light-hearted atmosphere where all of the participants feel comfortable providing their input. This is especially important for bringing in new Board members. Any number of variations on this activity can be created. For example, each member can be asked to make a secret prediction (before the first round of voting) about which nonprofit is likely to survive and why, and those predictions are only revealed once all of the voting is concluded. The amount of information on the nonprofits should be adjusted depending upon the time allotted for this activity. Philanthropy Associates provides professional consulting on planning, implementation and evaluation to help individuals and institutions achieve their philanthropic goals. Contact Information: Ann Shulman Stephen Colwell Philanthropy Associates, Inc. 1038 Merced Street Berkeley, CA 94707 510-525-4990 ann@philanthropyassociates.org stephen@philanthropyassociates.org www.philanthropyassociates.org 10
SOCIAL VENTURE KIDS TEACHING STRATEGIC PHILANTHROPY By Tom Donlea Social Venture Partners International To Spend, To Save, To Share. If every child divided his or her allowance among these three categories, not only would kids learn the value of establishing savings, but also that of participating in meeting community needs. The call to involve children in this valuable learning the experience of practicing effective and meaningful philanthropy has been answered by Social Venture Kids. Social Venture Kids (SVKids) is a hands-on grantmaking program that teaches teenagers the process and benefits of strategic philanthropy. Comprised primarily of the children of Social Venture Partners (SVP), SVKids doesn t just have a car wash and hand over the profits to a charity. Instead, members spend months planning and executing fundraising activities to accumulate funds ranging from $5,000 to $15,000. They do extensive due diligence to determine where to donate these funds. They perform research, listen to experts, and hold discussions to decide what problems in their community they want to help alleviate. They write grant guidelines, evaluate proposals, conduct site visits and learn to read financial data before deciding which agencies to fund. The nine-month process mirrors the SVP strategic investment model that is used to invest in nonprofits in the community. The difference is that these are teenagers, and it is hoped that the experience will instill in them the desire to continue to give to their communities throughout the rest of their lives. The program originated in SVP Seattle in 2000 and has since been replicated by two other SVP affiliates: Arizona and Calgary. 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 11
In 2004, SVP Arizona s group of 12 teens examined 30 different projects that focused on the high school drop-out rate, ranging from drop-out recovery to tutoring programs to computer labs. They talked with school counselors in a neighborhood plagued by gang involvement, visited a music academy for impoverished children, and went to the homes of non-english-speaking families who needed help learning how to navigate the public school system. These experiences exposed the teens to a side of life many had not seen before as children of high-net-worth parents. After visiting a domestic abuse shelter, one Seattle SVKid wrote, As with prior site visits, this encounter prompted thought and reflection. I have read accounts of domestic teen abuse and watched TV shows depicting its horrors. I understood the issue, but it had never affected me in such a personal way. I have a different perspective and appreciation for my life now. I also realize the value of giving back to the community and of doing whatever I can to help others. There is a real need for help out there, and we are glad we can be making a difference. By empowering themselves to do something about the problems they see, SVKids begin to think of themselves as philanthropists. I ve learned so much. I wouldn t trade it for anything, said one participant. It was something new for me to be that involved in the community, and it seems like something I will do for the rest of my life. By their involvement in philanthropy at an early age, SVKids are well on their way to becoming life-long, strategic givers. How can you incorporate a program like this in your family? Allow kids to do research about focus areas for philanthropy that matter to them. Give kids the power and autonomy (within pre-arranged boundaries) to decide how funds are contributed. 12
Go out with your kids on the site visits and let them lead you could learn a lot. Before making a new round of grants, have the kids review the year past and see what they can learn about those prior contributions. Once your kids get the fever for philanthropy, have them tell their story. They ll learn most by teaching others. SVPI represents a network of engaged philanthropy organizations in 22 cities in North America. Contact Information Tom Donlea Social Venture Partners International 1601 Second Avenue, Suite 615 Seattle, WA 98101 206-728-7872 tom@svpi.org www.svpi.org JUNIOR BOARDS WHAT, WHY AND HOW By Philip Flynn, III, Ed.D. Philanthropic Focus You ve established a family foundation. You re feeling pleased with embarking on one of the most rewarding philanthropic endeavors you have ever done. And you want to get your children involved, and their children. After all, the leadership of the foundation should rest with a family member and not some legal trustee after you ve moved on. And you know that your young family members are ready, willing and able to take on the task. Well, maybe not. In my 20-year experience working with family foundations, young family members aren t so willing or able to identify with your charitable entity. They ve never been taught! 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 13
So how can this be addressed? Form a Junior Board of course. What? A Junior Board is comprised of family members in the general age range of 12 to 21 years of age. The Junior Board is an ad hoc committee of the family foundation s board. It has the responsibility to select which charities to support, and how much to donate within a predetermined distribution amount. For example, a $12 million family foundation may allocate the Junior Board $25,000 to distribute for the year; a small amount of the total distribution requirement, but large enough to have weight. With the assistance of a good facilitator, the Junior Board should make site visits, present its choice(s) to the full board at foundation meetings, prepare the gift agreements, determine program reporting mechanisms it would like to see, etc. Why? Because people will support what they help to create. (Anonymous) The business skills the children learn in the process are invaluable! Investigatory: what cause and charity; how to read an annual report. Compliance: disqualified personnel, self-dealing. Financial: budgeting, value analysis, mid-project reports, etc. Plus they get to see results in their own community. Most important, the family foundation is cultivating its leadership from an engaged group of family members, not outside counselors. Talk about learning responsibility! By being an active member of the family s foundation, they receive a comprehensive education in the business of philanthropy and what makes it different from charity. 14
How? Simple: just do it! Depending on the governance format related to a specific family/private foundation, the board of directors establishes a committee a Junior Board. How much money is to be allocated to the Junior Board? What is the eligibility of the Junior Board? Blood relation lineage or not? Immediate family or a larger circle? Age range specific? These are all issues that are discussed at the senior board level. And as the family gets older, or the size of the Junior Board gets larger/smaller, these parameters can be re-examined and addressed. The Junior Board can often bring the family closer. Parents quickly see a change in their children s community involvement. Family foundation meetings often have more significance for the children than a regular family visit. And all in the name of philanthropy! I know of no better way to educate and develop philanthropic leadership for a family foundation than through a Junior Board. Dr. Flynn has established and worked with Junior Boards for the past 20 years. His firm, Philanthropic Focus, specializes in private foundation governance, compliance, gift management and legacy planning. Contact Information Dr. Philip Flynn, III Philanthropic Focus 140 38th Court Vero Beach, FL 32968 772-633-6810 pflynn@philanthropicfocus.com www.philanthropicfocus.com 55 Walls Drive, Fairfield, CT 06824 800-839-0054 www.foundationsource.com 15
ABOUT FOUNDATION SOURCE Foundation Source is the nation s leading provider of outsourced services for private foundations. Our services relieve donors, directors and advisors of the burdens of foundation management, so donors can focus on their philanthropy, and advisors can focus on counseling clients. Services include: Foundation Source Back-Office A full range of outsourced services for foundation administration, real-time compliance monitoring, transaction processing, tax preparation and filing, and regulatory and financial reporting, to keep foundations running smoothly and efficiently. Foundation Source Online A online command center for running the foundation that allows donors, directors and advisors to communicate, collaborate and practice philanthropy, all driven from a secure, customized web site. Foundation Source Requests An innovative technology and support service that makes it easy for foundations to organize, track, review and respond to grant requests from charities seeking funding. Foundation Source Client Services Personalized service and support for each foundation, delivered by senior executives with extensive knowledge and experience in foundation operations and administration. Foundation Source markets it products directly as well as in partnership with leading law firms and financial institutions, including Bank One, TD Waterhouse, Bear Stearns, Mercantile, Wilmington Trust and Atlantic Trust. The company is headquartered in Connecticut with regional offices in New York, Philadelphia, Palm Beach, Chicago, Denver and San Francisco. For more information, go to www.foundationsource.com or call 800-839-0054. 16
55 Walls Drive Fairfield CT 06824 800-839-0054 www.foundationsource.com 2004 Foundation Source Philanthropic Services Inc. All rights reserved. Foundation Source is a registered trademark, and Foundation Source Back-Office, Foundation Source Online and Foundation Source Requests are trademarks of Foundation Source Philanthropic Services Inc. Family Involvement White Paper 06-01-04