Teaching the Next Generation About Philanthropy

Author: Virginia Esposito

Article extracted from Guidestar Blog

In the early days of foundations, the transition from the first generation to the second often didn’t begin until the children of the founder were gathered in a lawyer’s office to read his or her will.

There, the founder’s adult children would often be surprised to learn that the family had created a foundation. In some cases, they didn’t even know that their families had enough wealth to support philanthropy.

Thankfully, those days are largely over.Today, these abrupt transfers are becoming less common—and they are giving way to a much more deliberate approach to involving the next generation.

According to the National Center for Family Philanthropy’s 2015 Trends Study, nearly three in five U.S. family foundations engage younger family members in the foundation—and more than two in five say they expect to add to or increase the number of younger-generation family members on their boards.

This is an encouraging trend, especially for those of us who believe that these important institutions can have a much greater impact if they can keep the family engaged in their work. By teaching their children about effective philanthropy and engaging them in the family’s work, foundations are, in turn, becoming smarter about their grantmaking and helping the charities they support achieve more.

This is true both for foundations that are looking to operate in perpetuity and for those that are set up to spend out their assets over a limited life. In both cases, offering support for the next generation is a crucial piece of the foundation’s success.

But, for many families in organized philanthropy, the transition remains rocky, even if they understand that it’s important to get the next generation engaged in their work.

When I talk to families about how to manage their transitions, I often hear reticence—reticence that the current generation will have to give up their roles within the organization, about differing values, or about the lack of time that the next generation can give to the cause.

These are all very valid concerns. But after working with hundreds of foundations across the globe that have grappled with this thorny issue, there are a number of steps that the current generation of family leadership can take to ensure that they are preparing the next generation while maintaining their own philanthropic identities:

INTRODUCE THEM TO YOUR FAMILY’S VALUES

Whether you’re the founding generation of your family’s philanthropy or you’re carrying on the legacy of your parents or grandparents, it’s important to help the next generation understand your family’s history and values.

While each person brings her own values and personality to the role, she is more likely to be invested in and careful about the work if she sees how your foundation connects with your family’s history.

We’ve seen many successful multi-generational foundations take the time to create family histories, record and preserve interviews with family members, and set up regular opportunities to bring family members together informally to spend time together and learn from each other.

GIVE THEM THE CHANCE TO EXPLORE THEIR OWN PHILANTHROPY

The most successful multigenerational foundations find ways to give each successive generation an opportunity to learn about giving through their own activities.

That often means doing more than simply giving them a junior position on the board or a pool of money to give away.

It means encouraging them to pursue their own philanthropic interests.

Some families encourage their children to volunteer at a young age, with the goal of giving them an opportunity to explore and identify the causes they care about the most, to see the world’s challenges and problems firsthand, and to better understand how nonprofits work.

Others provide matching fund pools or other giving instruments to help them learn how to make effective philanthropic decisions.

Each family is different, but those that help their children explore philanthropy at a young age are more likely to engender a passion for carrying on the foundation’s work.

GIVE THEM THE RIGHT TOOLS

To practice philanthropy well, you need to know more than just how to write a check. You have to understand how to properly manage an organization, people, and money.

As a result, families that are looking to bring a new generation to the table should also take steps to teach them financial literacy and prepare them to understand how to read a balance sheet. They should learn about proper governance and effective management.

You should also plan to have frank conversations about partnerships and power. The most successful foundations don’t just give away money. They identify high-performing nonprofits that are doing work that aligns with their missions—and they build partnerships and relationships with other people and institutions.

About the Author:

Virginia Esposito is founder and president of the National Center for Family Philanthropy, a nonprofit that provides research, expertise, and information to families who give.