The process of philanthropy can be complicated. We look at how the right approach to giving matters.
Considering the disruption brought on by the COVID-19 crisis, philanthropy by private businesses is now more important than ever. Beyond finding the right business response, this is also a time for family enterprises to reflect and look at ways to make a lasting impact. As families across the country reach out to support communities, we look at how the right approach to giving matters.
With so many different avenues for making a difference, the process of philanthropy can be complicated. Asking the right questions from the beginning is key for greater impact. I’ve always found that an admirable feature of family business owners is their desire to give back – perhaps even more so than others. This isn’t just anecdotal evidence: the STEP 2019 Global Family Business Survey revealed that family-owned businesses show a greater tendency towards philanthropy (particularly those led by millennial leaders in the Middle East and Africa).
The same survey found that about 52 percent of global family business leaders are planning to spend their retirement years on non-business activities, including philanthropy. Naturally, attitudes differ between generations and geographies, but the underlying message is clear: charity matters.
Although many families and individual members gift frequently and generously, finding the best way to donate isn’t an easy task. All too often, donors struggle to find the right charities or causes and the most efficient ways to support them. Many people want to do more than just make a financial donation, perhaps by rolling up their sleeves and getting hands-on, but they’re not sure about how to proceed. There are also those who wish to contribute in their wills or with lifetime giving and don’t want their endeavours to be wasted.
Considering this, we talk with families and individual clients about the best way to give back, helping to bring clarity and purpose to their philanthropic goals right from the start. Asking some (occasionally challenging) questions is what helps family businesses through their journey of giving.
A simple question to map out a path
We recently advised a family that wished to set up a charitable vehicle to create grants in support of educational establishments in the UK. The first step was to bring the family together in open conversation to help them identify a common goal. The family could then decide on the right level of funding and involvement by various members, the appropriate vehicle and the operational logistics.
When we begin conversations like this, we ask everyone a simple but fundamental question: “What’s the purpose of your wealth?”
Perhaps they want their family name to survive across centuries, or maybe they want to be materially comfortable and support future generations. For others, it’s all about giving back. In many cases, it’s a combination of these.
Honest, constructive discussion is vital because it draws out the motivation behind people’s actions and goals, in turn making them more tangible. It sounds like an obvious approach but, more often than not, people aren’t wholly aware of their motivations until they’re asked to articulate them. On doing so, the real purpose of the project takes shape, and we can understand the driving forces behind the family’s behaviours and expectations as the project develops.
The spectrum between feeling good and doing good
The second question we ask is: “Why do you want to get involved in philanthropy?” Again, this is a rather personal question that requires more than a moment of reflection. Do you have a desire to see a specific impact on a particular community or age group? Do you simply feel you ought to?
There are as many reasons for people’s charitable motivations as there are causes – perhaps more.
A generational trend has emerged, wherein some Generation X and many Millennials want to do much more than hand over a cheque. They seek to immerse themselves in the causes they support, and work alongside the charities and other likeminded individuals to achieve tangible results; giving back to society is one of their life goals.
The how and the when of giving
Once the two key questions have been answered and agreed upon, it’s time for the family (or the individual where this isn’t a joint activity) to think about the act of giving.
For example, if someone is motivated by feeling good, their purpose may be fulfilled with a one-off donation. Where there’s a deeper desire to participate in a cause and witness the impact, an arm’s-length one-time donation might result in dissatisfaction. One of the families I worked with was keen on making quarterly donations to an arts institution, whereas another wished to set up a scholarship for young talent and be on the board to track its progress.
Next comes the actual giving. Again, the myriad methods depend on the particular motivations.
That’s why we ask about the donor’s tax residence, the amount they’re looking to donate (and the frequency at which they would like to do so), whether this is a family or individual activity, the level of involvement they’d like to have, and many other questions, before making any suggestions.
Identifying what success looks like
We also help family businesses understand how to support their charities of choice over a longer period of time, working with them to design the criteria for success.
One of my clients felt strongly about women’s rights in an African community. They decided to champion self-made female entrepreneurs in the region by teaching courses locally – a considerable time and travel commitment. Here, the rise in employability was a key metric, but only because the client was patient. Sometimes, you have to be willing to wait to see the impact. Realistic timing plans and sensible expectations of results both stem from those crucial first conversations.
Due diligence is also part of ensuring a successful outcome, and it’s something we pay close attention to. Spotting red flags around structural weaknesses or doubtful practices helps give the green light on the choice of charity and the right way to support it.
Finding commonality for greater impact
Inevitably, where there are many family members, there are many opinions. In one example that springs to mind, a matriarch revealed to her children their level of wealth for the first time on a weekend family outing. Their first reaction was not one of shock or joy, but of charity.
However, although their instincts were highly generous, their preferred causes varied greatly.
One of the siblings was keen on supporting environmental concerns, another wished to focus on improving employability for people from underprivileged backgrounds, and the third wanted to help end loneliness.
Here, creating room for agreement was the most important. With some help, the siblings made great progress in the art of open communication and reaching a consensus – as illustrated by the family’s eventual agreement to act together. They had the option to rotate between causes or allocate different weights but resisted splitting the funds. Instead, they saw an opportunity to create a whole-family legacy for the next generation.
Bringing out the best in family businesses
Philanthropy isn’t a singular, separate branch of decision-making – it is often part of wider governance discussions that we have with our clients. It demonstrates how noble instincts can be combined with cohesive processes to set family businesses apart from the rest.
With some thought and planning, families can make the greatest possible impact with their time and money.