Generations of Giving: Leadership and Continuity in Family Foundations
by Kelin E. Gersick
Lexington Books, 2004
283 pp., $70.00
Philanthropy, Heirs and Values: How Successful Families Are Using Philanthropy to Prepare Their Heirs for Post-Transition Responsibilities
by Roy Williams and Vic Preisser
Robert D. Reed Publishers, 2005
143 pp., $29.95
Although more and more people talk about “family philanthropy” these days, few seem to notice the latent tension between these two words. Which element comes first: others’ needs (philanthropy) or their own (the family)? The two books under review face this tension and forthrightly argue that it serves the common good for generous families to consider their own good too.
Researchers predict that over the next 50 years Americans will make and transfer over 40 trillion dollars of wealth. People want to own, control, and enjoy that largess. But they also wonder about the effects wealth and its pursuit will have on them individually and on their families.
The newly rich can learn much about what to expect by studying the experience of America’s wealthiest families, who for the last 100 years have stood at the vanguard in the march of affluence. Following methods used by his partner, Ivan Lansberg, in his excellent study of family business succession (Succeeding Generations), Gersick in Generations of Giving presents the results of studying 30 family foundations, all of which have survived through at least two generations. The typical foundation he studied was half a century old, controls over $75 million, gives away about $4 million a year, has a small professional staff, and operates under the direction of around eight family trustees. These are not dot-com foundations, but they reveal what the new economy millionaires and their children can expect.
Gersick sketches out two main paths that family foundations can take. Surprisingly, he argues that none start as truly “family” foundations. Like many businesses, they begin under the close control of the original donor or his chosen representative. Some foundations never abandon this monocratic governance, though it usually causes their demise within a generation or two.
To survive, Gersick argues, a foundation’s founder or family must make a choice: “They can establish a foundation that is primarily intended to achieve a particular consequence in the world, or one that is primarily intended to create a particular process in the family.” In the first case, the foundation will probably focus on the present and the accomplishment of certain charitable goods. Family members may find a calling in the foundation’s work—or they may not. Indeed, the family’s interest may ultimately prove irrelevant to the foundation, which may in time transition to professional management or even spend itself out to achieve its results.
The second choice establishes the foundation as for the family. It represents the founders’ desire “to create an opportunity for people they care about to discover their own passions and to enact their philanthropic values.” Such a “collaborative family foundation” emerges as the sought-after prize in Gersick’s account. It combines many of the objectives philanthropic individuals care about: doing good for others, doing it well, and doing well for their own family by doing so.
This prize is not an easy one to attain. Gersick observes that, unlike family businesses, family foundations can rely on no obvious standards of success. This means that families often tolerate or perpetuate poor leadership in their foundations. “No one’s dividends are dependent on excellent leadership and organizational profitability.” It also means that families have no “objective” criteria by which to adjudicate conflicts in the members’ philanthropic visions. Added to this absence of standards are the problems that any family enterprise faces: controlling seniors, rebellious juniors, the persistence of bad habits from one generation to the next, geographic dispersion, divided loyalties, inter-branch competition and jealousy, disruptive in-laws, and mistrust of other “outsiders.”
Gersick does not and could not solve all these problems in his book. But he does offer a number of helpful suggestions to people establishing or managing family foundations. First, he emphasizes the need for founders to make their own wishes clear: “Founders who want to have personal control during their lifetimes but do not expect to retain it after they are gone can do their followers a great service if they make that intention clear and help the system prepare to implement it.” Such expressions clarify the founding trustee’s purpose and give later trustees the “permission” to reinvent the foundation. One could add that founders who do wish to retain perpetual control have all the more reason to make their wishes clear. Gersick also stresses that “families have to work hard to differentiate the roles and responsibilities of governance from those of management. In the confusion, it is usually governance that gets forgotten.” Many foundations do a good job managing the grantmaking process. But grantmaking cannot exist in a vacuum. Thus, Gersick advises, families must spend time developing a mission, which means determining not just the family members’ interests, but rather the common ground (if there is any) of their individual dreams. And such discovery is not just talk: Gersick’s research suggests that the “more clear and thoughtful the mission, the higher the ratings on family collaborations, enthusiasm, positive dynamics, and the foundation’s likelihood of continuity.”
In Philanthropy, Heirs & Values, Roy Williams and Vic Preisser consider family giving and family continuity through a wider lens than foundations. The Williams Group has focused on estate transition issues for many years, and its research suggests that only 30 percent of families transition their wealth successfully. The biggest threat to the successful transition is neither poor tax planning nor inadequate legal documents, but families who fail to prepare heirs adequately. In the authors’ previous publication, Preparing Heirs, Williams and Preisser addressed important deficiencies of estate planning practice in general. In their new book, the authors introduce family philanthropy as an important teaching tool for preparing children for wealth and responsibility and as a central part of the post-transition planning.
Although their book presents itself as a way to improve the odds of post-transition success, it actually goes much further and suggests that philanthropy is a way to teach what all parents want their children to learn: values, mission, and accountability. The number-one wish for most parents is for their children to be happy. Given a choice between a successful wealth transition and happy children, most parents would pick the latter. The good news is that Williams and Preisser propose a way to have both a successful transition and happy heirs.
The trick is to start early and keep at it. As the venerable educators Ted and Nancy Sizer have written, “If we care about our children’s values—how as a matter of habit they treat others and how aware they are of why they do what they do—we must look into the mirror.” Not surprisingly, in their research Williams and Preisser observed how modeling, communications, and trust were important in successful families.
Just as Gersick urged foundations to hone their focus, Williams and Preisser suggest that teaching children to follow a values-driven life, defined by a mission and a sense of responsibility, leads to happiness for them. Of course, such an effort takes an entire childhood to achieve. The authors do not claim to be child psychologists, but 40 years of work with families has given them many insights. Their wisdom is drawn from 3,250 families that transitioned their wealth over the past 20 years. This is not a comprehensive work on children and money; it is, however, a helpful book that provides some structure and interesting ideas for helping children understand caring and giving to others, being responsible, developing trust, and identifying mission. Learning in these areas made a difference in the post-transition success or failure of the families.
Williams and Preisser organize the book and sets of activities into five major age groupings. Their groups cover ages 5 to 30 and follow standard developmental stages: childhood, the middle years, adolescence, young adults and adults.
They suggest starting early: although age five might seem young for thinking about traditional philanthropy, it is not too early to put into place some building blocks for later. The authors suggest parents remain ever mindful of the “caring” aspects of their children’s development and extend that care into the work of the family’s giving. Children learn to care by being cared for and by observing the important adults in their lives care for others. When children begin to care about another—a younger sibling, a pet, or a favorite horse—that care can be nurtured. In the process, they learn about care, trust, respect, and responsibility: the building blocks of philanthropy and a happy life.
In the middle years the authors advise that parents help their children find their passion. Encourage and nurture empathy, and let them know that they can tell you about what they really care about. Practice being a source of advice not criticism.
Adolescence is a crazy time, but enlightened self-interest can become important at this age. Motivation may be limited at the start, but once actually involved, adolescents become more engaged. Philanthropy will not make all the stress of adolescence go away, but it may be a way to keep some stability and the lines of communication open between teens and adults as they discuss family giving projects, in a respectful way, for the good of others. Discussing the mission of the family’s giving provides an opening for some safe, philosophical discussions often not easily broached. Such discussions form the basis for mature discussions about life between adult heirs and their parents. It is at this post-30 stage when the children realize that their parents are not perfect, but that they are passionate about their philanthropy and struggle with doing what’s right.
Some readers may ask both books whether all this focus on families, their needs, and their continuity detracts from the real mission—the charitable mission? Shouldn’t people focus instead on giving or grantmaking, that is, on helping others?
If we lived in the Most Just City of Plato’s Republic, where private families and even marriages are forbidden, these objections would have greater force. But as it is, in our nation, caring for others devolves primarily on private individuals and private families, not on government or its agents. Since this is the case, if we want citizens to exercise charitable virtues, we must teach them such virtues where they live, which is, for the most part, among their families. To this end, both these books offer a service to the public and private good.
Dr. Albert Keith Whitaker is a research fellow at the Boston College Center on Wealth and Philanthropy, director of Calibre Advisory services, and president of The Morton Foundation, Inc. Dr. Robert Kenny Jr. is executive director of More Than Money.