A Family Foundation Won’t Fix What Isn’t Working:
Social Capital and a Pragmatic Approach for Generous Families
Families create foundations with the goal of using their wealth to do good in the world. Most also have aspirations for the impact the foundation will have on the family: strengthening relationships, modeling family values, developing leaders, and creating a family legacy. Indeed, in many families, the goal of family togetherness is as great or even greater than that of social impact.
Family philanthropy offers the potential to realize many of these objectives: it can create bonds across branches and generations; teach important lessons about generosity; unify a family around a shared sense of purpose; and foster personal growth. These benefits can positively ripple throughout other aspects of the family enterprise, establishing close relationships and trusting bonds that better enable family members to work together.
But a common pitfall we have seen in our work with philanthropic families is the belief that a family foundation can mend fractured relationships. Indeed, we have worked with families where founders had the express intent of “forcing” their descendants to “learn to get along” by involving them in the family foundation. While a foundation can be a powerful vehicle to strengthen relationships and create opportunities for collaboration, we have yet to see it succeed in mending longstanding family conflict or tensions. All too often, families who embark on this journey hoping to fix problematic relationships are disappointed, and in some cases, the efforts to work together can further harm frayed relationships.
Assessing your Family’s Social Capital
Before committing to engaging in collective philanthropy, we encourage families to be intentional about their goals and honestly assess their capacity for working together. What exactly is the family hoping the foundation will achieve for the family? For the world? Does the family have what it takes to achieve those goals?
A useful lens for families to ponder such complex questions is through a social capital framework (Hale, 2019; Nahapiet & Ghoshal, 1998) which assesses the quality of relationships and connections within a given group. Within this framework, families with strong social capital possess three key elements:
- Structural Capital: They have established forums for communication, quality interaction, and a strong sense of connection across different family branches.
- Cognitive Capital: They share a common understanding of the family’s purpose, history, and core values. This shared narrative serves as a touchstone for decision-making.
- Relational Capital: Their relationships are characterized by trust, mutual respect, and a willingness to work through conflict. They can point to recent successes in reaching consensus.
Family members in a family enterprise are united by a common purpose: the financial success of the business. This shared goal is a powerful incentive for them to set aside differences and find common ground. Within family philanthropy, however, giving is often informed by personal interests and values, making family alignment more elusive to obtain and disagreements personal. In families where there may be limited or strained social capital to begin with, a collective giving experience can amplify fissures and differences across the family system, frustrate collective efforts, and in some circumstances, may actually further amplify existing conflicts and tension.
Reflections for Families: Three Critical Questions to Guide your Strategy
So how do families avoid these pitfalls and assess whether collective giving is right for them? LGA advisors work closely with families to thoughtfully explore three critical questions to guide and inform a strategy tailored to their needs.
- What are your family’s expectations of philanthropy?
Taking the opportunity to weigh in on your hopes and expectations for philanthropy is a prudent first step that can clarify motivations and gauge the relative consensus among family members regarding their goals and priorities. Why might family members want to do philanthropy together? What are you hoping to achieve by bringing the family together in a shared philanthropic effort? Are there values and causes the family naturally coalesces around? How do these considerations align with other goals within the family?
There are many different reasons why families may choose to do this work together, including:
- Perpetuate the philanthropic priorities of the founders.
- Bring the family together around a shared philanthropic agenda.
- Use wealth to have a meaningful impact on critical issues important to family members.
- Instill values of generosity and stewardship.
- Serve as the “glue” that unites the family—helping to establish and/or deepen relationships across generations and branches.
These are all reasonable goals for family philanthropy, but they cannot all be primary, and each has different implications for the design of the family’s philanthropy. At the root of much of the tension we encounter in family philanthropy is the reality that family members are holding different, often implicit and sometimes conflicting, understandings about the fundamental goals for the effort. It is very hard to succeed in a joint endeavor if participants have different ideas about what they are aiming to accomplish.
This is also the time to be honest about expectations regarding the role of collective giving in mending fractured relationships. Who is holding these aspirations, and are they widely shared?
During formation or transition periods, families should step back and consider (or reconsider) the core purpose of the family’s philanthropy and their degree of alignment on priorities. As in business, purpose and values are at the heart of great philanthropy. Consulting with those who would be invited to participate, including the rising generations, then determining whether you share enough common ground to build upon is critical before committing to a giving structure and developing a collective strategy. If family members have divergent priorities, it may require a high degree of social capital to find alignment.
2. How strong is your family’s social capital?
An honest assessment of how the family is currently working with and relating to each other will offer useful insights, considering the structural, cognitive, and relational aspects of social capital, taking into consideration the following questions:
- Do we experience a strong sense of connection across the family and have established forums for quality interaction and communication?
- Do family members have a shared understanding of purpose or what the family stands for, and a common narrative about the family’s history, culture and values, which serve as touchstones for decision making?
- Are our relationships characterized by trust, mutual respect, and goodwill, and can we point to recent instances where we have reached consensus or worked through a conflict successfully?
While levels of social capital vary across families and can fluctuate over time, there needs to be a baseline of capacity and trust within the family to be able to work together voluntarily. Unresolved disputes, deep resentments between family branches, histories of abuse, or conflicted decision making in other spheres of family life may be red flags to attend to first.
3. What is the family willing to commit?
A family foundation requires attention and leadership from the family, even where there is professional staff. It can be meaningful and interesting work, but it is work – a fact often glossed over in successful enterprising families. So often we hear family business leaders say something along the lines of: “How hard can it be to give away money?” While simply making donations to a handful of charities is not all that difficult, giving money away in a manner that has a meaningful impact in the world and also strengthens family relationships is no small feat.
It requires engagement, accountability within the family and to its external stakeholders, as well as openness to learning, process, and shared decision making. Who has capacity and interest to lead? How much time and consideration are family members willing to invest? Are they willing to do the work necessary to find common ground: productively address conflict, compromise, listen openly, and set aside personal agendas?
Success requires the development and implementation of the governance and processes needed to support the family’s efforts and build its social capital over the long term. Disengagement, unfulfilled commitments, or divergent priorities are more likely to create difficulties for a family foundation than to be solved by it.
Promising Pathways
Reflecting on these questions, families can determine if a collective approach to giving is truly in their best interest, rather than being adopted to fix existing family issues. For families interested in engaging in collaborative family philanthropy, recent research from the National Center for Family Philanthropy’s study, “Philanthropy in Complex, Multi-Generational Families,” led by LGA Partners Ashley Blanchard and Wendy Ulaszek, provides pragmatic guidance on how to structure and operate family philanthropy to effectively balance individual and collective goals.
If an honest assessment reveals that a collective approach isn’t the right fit for your family, that’s ok. There are individualistic approaches that giving families can explore, where philanthropy and the spirit of generosity can be nurtured and expressed as a family priority, which enable autonomy and require less social capital. Approaches such as creating individual foundations or funds, discretionary giving within a family foundation, or discrete programs reflecting individual passions allow members to engage in philanthropy while minimizing the need to work together.
In our work, we also encourage families to consider practices to strengthen social capital within their family. Research tells us that social capital requires time and consistent positive experiences to develop and grow and often emerges as a result of activities intended for other purposes. Building the family’s governance strengthens its social capital, as do creating shared experiences, celebrating holidays and milestones, and cultivating family traditions.
Before establishing a family foundation for the purpose of collective giving, it is imperative that families consider their ability to find common purpose and work together productively. A collective approach to giving should build on a foundation of social capital, rather than be a driving tool to create it.
