False Gods — Givin' on a Prayer II: The Myth of “Easy” Family Philanthropy
by Randy Kaufman, with research assistance from Dustin Lowman
Guidelines and a gavel — two ingredients for successful family philanthropy.
My Most Memorable Family Philanthropy Journey
“The only place where success comes before work is in the dictionary.”
Years ago, I had a client who, in his twilight years, had four accomplished adult children, each of whom had their own college-age kids. His wife had passed. He, at the age of 85, wanted to organize a family foundation, but had delayed because he was intimidated. I implored him to start: “If not now, when?”
Convincing him to start was hurdle #1. Once he agreed, there came hurdle #2: The adult children weren’t comfortable inviting their own children into the fold. More imploring followed. Grandchildren were invited. The seats at the table were filled, but the grantmaking was scattered, and it became a race to my client for his approval — which he was incapable of denying, much like the candy he doled out when the kids, and grandkids, were small.
So, a new rule was created: My client could, and would, only give one response: “I’ll get back to you after my weekly call with Randy.” We all knew that this meant: “No — I’m going to follow the rules.” But, this answer gave him the armor he needed, and it worked. We agreed upon other rules too, including the policy that the father would never grant money without explaining the grant to the board, and hearing any resistance they might have.
New rules, like all rules, are hard to follow. The first time he gave out a grant without exactly following the rules set forth above, all hell broke loose. All parties wanted to close the foundation, separate the assets, and go play with their own marbles by creating mini-foundations or donor-advised funds. I begged them to try harder, follow the rules, and give it a few years.
They persevered.
At one point, a grandson wanted to give money to a nonprofit theatre. He explained why, but the grandfather (who was an artist himself) thought it made no sense. This theater was too avant-garde; too strange for his liking. A year later, when they saw a musical together at that very theatre, the grandfather called me to thank me. The entire family embraced the project, and it became a grantee.
Take a bow, perseverant family philanthropists.
Learning flowed across generations. It was not solely imparted by the seniors — as the seniors often think will be the case.
Just months before my client passed away, he sent me a holiday note I’ll never forget, telling me that our pre-meetings (in advance of the formal meetings) were the best family meetings he’d had in 20 years. Tears dripped down my cheek. My career has been long, and hopefully has years to go, but I’m not sure anything will match the pride and joy I felt when I read his letter.
That process certainly wasn’t easy, and the story is but a snippet of all that transpired between the family members. But in the end, it brought joy and satisfaction, unified the family, helped train two generations, and created positive impacts for the many causes they still support more than a decade later. Most importantly: It wasn’t easy. It was challenging — very, very challenging — and that’s exactly why, in the end, it was so beneficial.
Motherhood & Apple Pie
The term “Motherhood and apple pie” refers to sacrosanct American symbols. With a little help from the Cambridge Dictionary: “For some Americans, low taxes and small government are as sacred as motherhood and apple pie.” Let me add family philanthropy to this list.
There often comes a time in the arc of a family where philanthropy becomes a priority. Unfortunately, successful family philanthropy takes work. Hard work. Really hard work. In fact, it takes much more work than individual philanthropy, which isn’t easy, but at least is not burdened with family dynamics and emotional baggage.
Throughout my career, I’ve worked with families who expect that family philanthropy will be easy. Given the difficulty of individual philanthropy, I’m forced to wonder: Why? Is it because some advisors — who, by the way, make money by setting up family foundations — oversell them? Is it because advisors only see the relative simplicity of paperwork, leaving the family to fend for themselves? Is it because too few advisors are familiar with the day-to-day challenges of running a family foundation? Or is it that some families are just too dysfunctional to create a well-functioning family foundation in the first place?
Is family philanthropy a false god?
In my opinion, not at all — it’s just hard.
Breaking News
“Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty…I have never in my life envied a human being who led an easy life. I have envied a great many people who led difficult lives and led them well.”
When it comes to ambitious goals, I believe hard is good, and easy is bad. It’s a good thing, too, as researchers have found that the most durable, profound pleasure comes from activities that require effort.
As someone who thrives on a challenge — be it learning to rock climb early in life, heli-skiing in midlife, learning to race sailboats late in life, or starting numerous new jobs all the way through — I know that easy wins do not great memories make.
Therefore, I beg my clients to lean into the challenge of successful family philanthropy. It causes all involved to get out of their comfort zones, and when it works, new levels of respect and understanding exist between the family members. To aid in this process, I’ve condensed my experience to a few critical rules — Randy’s Rules.
Rule #1: If the senior generation embraces the monarchy model of governing, stop right there, scrap the foundation, and watch more episodes of The Crown.
I’d advise showing up to family meetings in something other than a gilded carriage.
No one wants to be ruled by a king or queen — especially one to whom they are related. The only way I’ve seen family foundations work is through empathy, listening, and equal footing. Very little is guaranteed in life, but I guarantee you this: Running a family foundation the way you run your company is a surefire way to alienate adult children. Building consensus is critical; governing with an iron fist, lecturing, and chastising is fatal.
A study by the Jewish Communal Fund (JCF) in which I participated, called Bridging the Generational Divide, found that 61% of respondents named excessive control exerted by the leader of the family as a key obstacle blocking the next generation from family planning conversations and successful leadership transitions. The study concludes that, in such autocratic dynamics, the next generation is included in decision-making a mere 6% of the time. That is not enough.
The study also reports that successful entrepreneurs have the hardest time giving up control. Their identities are interwoven with their businesses, and they tend to believe that no one else knows how to manage. They view the family foundation as simply another outlet for these skills. Moreover, they feel that, if they relinquish their roles as dictator-kings (a.k.a. CEOs), they will feel displaced, and their status will be diminished.
2. Hire an outsider to create agendas, run meetings, ensure everyone has time to speak, take meeting notes, and moderate when necessary.
When Mom or Dad fulfills this role, they are always Mom and Dad...bossing kids around. You probably didn’t teach your kids to drive, and you absolutely shouldn’t teach them this, even if you’re qualified. A good outside facilitator has the power to be an objective third party.
3. Write a rulebook (kind of like we’re doing here).
OK — I’ve never been a kindergarten teacher, and I don’t have kids, but I do know that groups benefit from universal guidelines. They need to be enforced by the moderator, as rules are invariably broken. Many people my age and older are surprised to learn that enforcement is more important for the senior generation than their offspring. Here’s a basic rulebook that might help you get started:
No meeting shall be held in the ancestral home. That’s when people revert to childhood dramas — who sat where around the Thanksgiving table, who twisted whose arm long enough to make them cry uncle.
Cell phones shall be silenced unless there is a pending medical emergency. No exceptions, no excuses.
Business casual attire for all. No flip-flops, no bra straps hanging out (spoiler alert: that tends to infuriate us elders), no shorts, no requirement of pressed white shirts and striped ties or blue pumps, etc.
Everyone shall be punctual — whatever that means for the family. Some families have a 20-minute grace period; others have a 20-second grace period. It doesn’t matter which you choose, so long as everyone agrees to, and adheres to, this rule.
Focus on listening, not speaking. No one wants to be talked over. This is especially important for family leaders to keep in mind.
Be tactful and respectful at all times. Behave as you would in a board meeting with outsiders.
Police all nonverbal messaging. To be left at home: eye-rolling, moaning, grunting, and fist-clenching, and certainly fist-pounding.
The Foundation meeting will be a judgment-free zone. Banish “you” statements, like “You were always late with homework.” Replace them with “I” statements: “I hear you saying that you were unable to complete your research, and that you’ll finish it by the end of the week and send it to us.”
Give everyone a voice — when someone is speaking, no interruptions allowed. None. In my own family meeting a few years back, we used a “talking spoon” that the moderator passed around. If I wasn’t holding the spoon, I wasn’t allowed to speak. Try it!
After someone articulates their thoughts, there shall be no fighting, no biting, and no pouncing. Never assert that someone’s chosen cause is stupid. Instead of jumping to the conclusion that saving African lions is a lost cause, ask questions about why your son wants to save lions, when all you want to do is give to the church.
Agree on a governance structure. This will look different for every family, but I’m a big proponent of giving a bit of power along with a voice. “Power” here means “money,” plain and simple, and the ability to give to one’s preferred cause. One good practice is allocating a certain amount to each family member and asking that they provide research to support their cause. After they present research, allow them to give. No veto rights. This empowers the younger generation and creates shared learning across the generations.
Work to find shared values across the generations. Using value cards can help. Create vision and mission statements, and use them as your North Stars.
Be patient. Understand that differences and tensions will arise. That’s normal. That’s okay. Take a deep breath and let it go.
Practice Makes Perfect: Further Reading
Many before me have written about good practices for family foundations. One article I particularly like suggests the following: Clarify your philanthropic identity; prioritize motives; articulate values; craft vision and mission statements; know your giving personality; form a group identity; bolster your legal and fiduciary understanding; assign roles and responsibilities; establish governing processes and procedures; schedule checkups; and plan for succession.
For more resources on family foundations, check out the National Center for Family Philanthropy’s “Current Practices in Family Foundations.” I highly recommend you read the JCF’s “Bridging the Generational Divide.” Finally, don’t forget to explore the excellent resources offered by 21/64, and Sharna Goldsecker’s wonderful book, Generation Impact: How Next Gen Donors are Revolutionizing Giving.
Happy reading, and happier giving!