Fall 2007
When It's All in the Family:
Challenges, Opportunities and Trends
in Minnesota Family Philanthropy
by Vicki Itzkowitz
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"The family foundations now passing leadership on to the third, fourth and
even fifth generations are a testament to the lasting impact that family
philanthropy can have on both the family and the community it serves."
— National Center for Family Philanthropy
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Family philanthropy is distinct from other types of philanthropy. As family foundations work to create positive impact, they wrestle with many of the same issues that concern other types of foundations, such as achieving their mission through grantmaking, sound governance and investments. But they also must deal with challenges
and opportunities unique to family philanthropy:
- Transitioning from one generation of family leadership to another.
- Staying in touch with geographically dispersed family members.
- Allowing for the impact of family dynamics and interests.
- Recruiting board or staff leaders from outside the family, when needed.
These factors represent issues of interest to those philanthropies and trends the communities and nonprofits they serve want to understand.
Involving and Training the Next Generation
If a family foundation is to be sustainable, current leaders know they must prepare for a transition in leadership from one generation to the next. "Nobody is indispensable," says Edie Thorpe, president of the James R. Thorpe Foundation. "I love this work and am proud of it, but the next generation is more than ready to take over. They will bring their good ideas and energy."
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"I love this work and am proud of it, but the next generation is more than
ready to take over. They will bring their good ideas and energy."
— Edie Thorpe, James R. Thorpe Foundation
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And to ensure that family members have the insight and experience to serve the foundation well, some family foundations set requirements for board members, such as volunteer experience in the nonprofit world or residency in the geographic area of grantmaking. Thorpe explains, "We need to know that they will serve the foundation the best; it's not just because they have the right name. We want them to be engaged in the work."
At the Mardag Foundation, for example, family members who serve on the board must be Minnesota residents. "Because our grants are made in Minnesota," says Tim Ober, foundation president, "board members must be familiar with the state's problems and
issues."
Identifying interested and appropriate family members for board service is only one step of the leadership transition process. Current leaders must also ensure that the next generations have the knowledge and skills they need.
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Sarah Andersen |
Sarah Andersen, president of the Hugh J. Andersen Foundation, describes the motivation she and her sisters had for preparing the next generation. "We became involved in the foundation at the death of two of the foundation's three directors," she said. "We weren't given an opportunity to prepare ourselves, and we didn't want that to happen to our children."
When their children were in elementary school, the Andersen family began a purposeful process of learning and hands-on experience. "As they got older, we asked them to choose their own leadership and begin to give away money," she said. "We started very slowly and carefully — $1,000 seemed like a huge amount to them." As adults, these next-generation board members are now determining their own priorities for distribution of $125,000 a year through a Next Generation Fund. And two members of the next generation are now serving on the foundation board.
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| Freedom to adapt to changing needs and
interests helps to make board service relevant and attractive to new and
prospective board members. |
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At The McKnight Foundation, the state's largest family foundation, members of the family's fourth generation serve as board members and board chair. Having grown up hearing about the foundation from their parents and grandparents, family members often join the board immediately after college. They participate in site visits with staff, go to conferences and receive an ongoing education about foundation process during board meetings. "This is a small family, so having them jump in with both feet has worked really well," notes Kate Wolford, president.
The James R. Thorpe Foundation sets up meetings for new board members with older members to share institutional knowledge and encourages new members to participate in meetings and conferences. Edie Thorpe also serves on the board of the Andrus family's larger foundation, the Surdna Foundation (James Thorpe's mother was an Andrus).
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Edie Thorpe |
Younger generations of the Andrus family have structured opportunities to be involved at Surdna, including a fund for family members between the ages of 25 and 45 — the Andrus Family Fund — and also through a teen philanthropy program.
The Andrus family is now approaching 400 members, and "it's exciting to have a program in place to tap the next generation of leadership," says Thorpe. A 2001 report, Sustaining Tradition, co-published by the Surdna Foundation and the National Center for Family Philanthropy, describes the development of the Andrus family's philanthropy program.
Formalizing Vision and Operations
As leadership of a family foundation passes from the donor's generation to the second and later generations, family members often engage in a deliberate effort to communicate, or in some instances create, agreements about purpose, values, structures and processes that will ensure the foundation's effectiveness. Periodic board retreats can play an important role, especially for the majority of family foundations without staff.
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Joe Bailey |
At the Gordon and Margaret Bailey Foundation, created by the family that owns the Bailey Nurseries, a fourth-generation wholesale nursery, decision-making had been very informal during the donors' lifetime. "We used to sit down around the kitchen table with my mom and members of the board to make decisions," Joe Bailey recalls.
Bailey, now president of the foundation, reports that following his mother's death, family members saw a need to become more formalized. "We hired a consultant to help evaluate our values and our parents' values, and we set guidelines so we could prioritize and evaluate requests," he said.
Cross-generational strategic planning can also help to facilitate a smooth leadership transition. Over the last year, anticipating change in board composition and leadership, the Thorpe Foundation organized several strategic planning meetings with the aid of a consultant. "We thought it would be helpful to rethink strategy together," says Edie Thorpe. "The younger people now feel that they have more ownership, more of a say."
Staying in Touch
Keeping board and family members informed and engaged can be a challenge, especially when they are geographically dispersed. Conference calls, reports and a family website help the Hugh J. Andersen Foundation keep family members beyond the St. Croix Valley connected to the foundation.
The Andrus family publishes an annual newsletter, which tracks developments at five family philanthropies and also highlights volunteer opportunities and the public service work of family members.
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Tim Ober |
Ober thinks effective communication strategies may one day allow Mardag to revisit its requirement that board members reside in Minnesota. "In this age of global information, it's easy to find out what's going on in the state," he said. "And perhaps we can do a better job of keeping out-of-state family informed."
At McKnight, Wolford sees relating to board members individually and collectively as a significant part of her role. "I provide a biweekly update on what's happening at the foundation," she says. "And I try to connect with each board member between meetings. I want them to know they're connected, to have the information they need to make decisions."
Donor Intent
As succeeding generations assume leadership, family foundations work to honor the founder's intentions while ensuring relevance to new realities. Donors' values often serve as a useful guide for future generations. Joe Bailey says that "it's always a little tense trying to guess what Grandma and Grandpa would do. But they adapted as they went through their lives, and I expect they would want us to adapt."
The current generation of leaders at the Hugh J. Andersen Foundation believe their father "would say, ‘You do what you think is right. I trust you completely.'" This freedom to do what they think is right, according to Sarah Andersen, has contributed to the freedom the family is providing to the next generation.
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| As succeeding generations assume
leadership, family foundations work to honor the founder's intentions while
ensuring relevance to new realities. Donors' values often serve as a useful
guide for future generations. |
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Freedom to adapt to changing needs and interests helps to make board service relevant and attractive to new and prospective board members. For succeeding generations to have the passion and energy to stay engaged, notes Wolford, they need to have the freedom to shape the future. At McKnight, current family and community board members have a "strong interest in honoring history but also in being innovative, taking risks where others are not taking action, and making a big difference going forward."
Wolford believes McKnight's founding donor, William McKnight, was "brilliant in leaving a lot of room for future generations to discern needs and responses." McKnight was committed to innovation in his own business practice, she explains, to finding good people and investing in them. "The real gift that William, and then Virginia as the second generation, gave is our guiding values," she says.
Looking Ahead
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"It is a tremendous privilege to be in a position to give resources to help
good organizations and good people do their work. Being on a family
foundation board is an honor, one we don't take for granted."
— Joe Bailey, Bailey Foundation
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Succession planning, incorporating the interests of new leaders, and ensuring relevance and impact are among the challenges family foundations know they will continue to confront in the coming years.
Several family foundation leaders point to differences in the younger generations that will surely affect future funding and future governance, including interests in the environment, in global issues and in technology. "We will not be looking only at the program interests of the next generation," Wolford predicts, "but also how they want to conduct their governance role."
Despite the challenges and changes ahead, family foundation leaders recognize the privilege of their role. As Bailey says, "It is a tremendous privilege to be in a position to give resources to help good organizations and good people do their work. Being on a family foundation board is an honor, one we don't take for granted."
© Copyright 2007 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher
is prohibited.
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What is a family foundation?
"Family foundation" is not a legal term. An independent foundation, which is the most common type of private
foundation, is generally founded by an individual, a family or a group of individuals, and may be operated
by an independent board or by the donor or members of the donor's family. This type is often referred to as a
family foundation.
Approximately two-thirds of the private foundations in this country are believed to be family-managed, with at
least one family member serving as an officer or board member of the foundation. Most of these family
foundations are run by family members who serve as trustees or directors on a voluntary basis, receiving
no compensation; in many cases, second-, third- or fourth-generation descendants of the original donors
manage the foundation. Most family foundations concentrate their giving in their local communities.
Thank you to the sponsor of this issue of Giving Forum:
SRI |
