Navigating Your Family's Philanthropic Future Across Generations

Principal Findings and Outlook

Principal Findings and Outlook

Organization

Figure 16: Family philanthropy as an important element of the family enterprise system (adapted from Vogel et al., 2020)

The third pillar of the Family Philanthropy Navigator focuses on the organization of giving. This element of the impactful philanthropic journey relates to defining the resources that are required and available to philanthropists and how to manage and deploy them in the most effective way to achieve philanthropic goals. This pillar includes the governance structures and decision-making processes that can best serve a philanthropic purpose, as well as measuring and monitoring the desired impact.

Resources Philanthropists provide various forms of resources. While the most common type of resource given by philanthropists is money, giving is not just about money. In the broadest sense, we can differentiate between four types of resources that philanthropists give, summarized in the widely used “4T” framework: treasure, time, talent and ties. ³ The sum of all these resources determines the most appropriate set-up and governance.

Governance Governance in family philanthropy, as in business, is the system of rules, processes and structures that help to direct and control an organization. Existing family and ownership governance systems often play a critical role in the philanthropic journey of many families. Our research reveals that some families structure their giving early on while others explore causes and broader family interests before establishing any formal structures. We also find that formalizing the family’s philanthropy tends to coincide with succession or changes in ownership. Factors such as values and tradition, family age and size, business cycle and dividends also affect a family’s decision to structure their giving.

The majority of experienced philanthropists that we interviewed link the success of their giving to how well their philanthropic vehicle functions. In that respect, they see both the sourcing and retaining of talent (whether family or non-family) to be of great importance. Building and maintaining a healthy and effective philanthropic vehicle involves good governance (e.g., effective board, productive committees, clear decision-making). Successful philanthropists in our study argue that best practice in governance as in a business setting helps to create a healthy philanthropic vehicle. Good governance is as important in philanthropy as it is in business.

Figure 16 extends on the well-established three-circle model illustrating the family, business and ownership groups and main governance mechanisms that can be leveraged for philanthropic activities. This includes the family office, if a family has set one up. Similarly, DAF mentioned in Figure 16 stands for Donor-Advised Fund, defined as a giving account established at a public charity. For many families, philanthropy is an integrated element of the wider family enterprise system. Clearly, however, each family enterprise system is unique, and many families do not necessarily have all the available governance mechanisms in place. The figure aims to provide an overview of the different possible interconnections within a wider governance model. However, several interviewees, especially the next gens, indicated that there is still a disconnect between written policies or statements and the actual practices in the vehicle’s governance and decision making. For this reason, governance becomes of critical importance as the complexity of the system increases.

3. Goldseker, S., & Moody, M. (2017). Generation Impact: How Next Gen Donors Are Revolutionizing Giving. Hoboken, New Jersey: John Wiley & Sons.

4. Davis, J.A. (2013). Cambridge Institute for Family Enterprise.

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Navigating Your Family’s Philanthropic Future Across Generations

Navigating Your Family’s Philanthropic Future Across Generations