Family Involvement: The Spectrum of Options

Kelin Gersick’s book, Generations of Giving: Leadership and Continuity in Family Foundations, outlines the patterns most often seen in family philanthropy. In the first generation the donor has the strongest involvement and control. In the second generation more family members become involved and by the third and fourth generation, staff is often a key part of the picture.  Gersick calls these stages: Controlling Trustee, Collaborative Family Foundation, and Family-Governed Staff-Managed.

Gersick, however, doesn’t suggest that these patterns are necessarily consecutive or developmental. He also doesn’t suggest that one is preferable to the others. Some families are very involved from the beginning, and others never feel the need to employ professional staff. Gersick points out a number of factors that affect the level of involvement of the family across generations. Examples of a few of these include:

• The size of the family – small families may need to work on inclusion, larger families on selection
• The goals of the foundation – some founders (or families) seek to accomplish a particular philanthropic agenda; others primarily wish to create an opportunity for people they care about to discover their passions and enact their philanthropic values.
• The culture of the family – families with a “hierarchical” culture are more likely to stay in the “controlling trustee” mode for a longer period of time; those with more democratic cultures are quicker to involve future generations.
• The availability of leaders from within the family – families that have leaders with strong interpersonal skills may be more likely to negotiate the complicated transition from Controlling Trustee to Collaborative Family Foundation.

We often think of family involvement as the Holy Grail of a family foundation and believe that involvement alone is a measure of success. However, any individual family may have reasons to define its governance role in a more limited way, or to believe that its effectiveness is enhanced by the participation of a significant proportion of non family members.

One reflection of this is that many families of wealth have established more than one vehicle for their philanthropy. Some families of great wealth, like the Rockefellers, establish foundations with different purposes, some closely governed by family, some not. However, it isn’t unusual for families to have more than one foundation and funds in a community foundation as well as individual philanthropic assets and interests.

What is the spectrum of involvement from which an individual family can choose?

Fortunately, there are many levels of involvement in giving that any family foundation can choose to reflect the motivations, skills and personalities of the family. The following ideas are based on a “least involved” to “most involved” scale:

Turn control over to others. Henry Ford is often criticized for letting others take control of the Ford Foundation since family members have not been on the board for many years.  A donor or family can choose to elect a majority of non family members to the board and ultimately choose not to have (or not require that there be any) family members on the board.

Although donors seem less likely to do this today, it isn’t unusual for a donor to choose to appoint primarily colleagues rather than family members to the board. This was the case of W.K. Kellogg who invited one of his sons to serve on the board but chose mostly members of the community who shared his ideas about children and health.

A donor might use this approach if he or she is more interested in what Gersick calls a “legacy of impact.” Some donors today are setting up operating foundations to make a difference in a specific area of their concern and interest and including experts from that field on the board. In these situations family members might or might not be included depending on their interest and expertise in the specific issue.

Keep control of board selection but allow for minimal family participation on the board.  Some families adopt a two layered structure (members and directors). Family descendents make up the member class which elects the board (either family or non family members). This allows family members to remain in control of board selection but not necessarily or always have a strong role on the board itself. Under this scenario, it is very likely that non family members will serve in leadership positions, including chairing the board.

One example of a way in which this might work is that a donor who wants to continue the giving in a particular geographic area might want to emphasize local board members who have knowledge of the community rather than involving family members who have left the community. Family members might want continued oversight of the foundation but at a minimal level.

Allow for both strong family involvement and a strong role for and significant number of nonfamily members on the board. In this case family members play active roles, rotate on and off the board as necessary or as their life circumstances allow. However, the majority of the board is nonfamily members. There is sometimes a family member chair and sometimes a nonfamily member chair.

Non family board members are usually very respectful of family interests. I have never seen a situation where nonfamily members overruled a family consensus, whatever their legal rights might be, but of course it is possible if nonfamily members are in the majority. 

Maintain a majority of family members on the board. Many families believe it is important to have a majority of family members on the board, and most family foundations do maintain a majority. However, this may not work for very small families or in the early generations. A family member or a nonfamily member might chair the board. 

Include only family members on the board. This is probably the most prevalent model, although a number of families do have one or two non family members who bring special expertise and have been connected to the family for some time (the family lawyer or accountant, for instance). In most cases in this model as well as the models above, the board would have predominantly a governance function. Staff would be hired to do most of the work. 

Include only family members on the board and expect family members to do much of the work.  In this approach a family member might be the Executive Director (although this could also be the case in 3-5 above). Each family member might be expected to take on specific responsibilities, such as being secretary, keeping the financial records, or making grant recommendations. Support may be primarily administrative. This is a model that is often used by smaller foundations.

In most of these cases a decision to function in one way does not need to be permanent but can reflect the availability and commitment to the foundation of family members at different points in their lives and in the life of the foundation. Because families and needs change, it might be wise to maintain at least the final authority to appoint the board that is part of the second option listed above.

Keep in mind that in most cases, donors establish the original legal parameters for family involvement in governance. Most experts recommend that the donor keep the official legal documents as clear and flexible as possible, leaving other suggestions to more informal, but written documents.

First Steps: Take Stock of Your Situation

So how does this spectrum apply to how your family approaches its philanthropy?

If you are a donor, think carefully about what is most important to you and include family members and non family members accordingly.  Make sure that future generations can, within this framework, make changes to meet current availability and interests of family members.

If the donor is no longer alive, honestly assess your family’s situation.    

• What did the donor say or put in writing that would help to understand his or her preferences in family involvement?  One donor I knew wanted his family involved in the foundation but also specified that 70% of the giving should go to a specific area of funding.  This has led to a board that includes both family members and experts in that field.  This family used the member/director model to assure that the family would always be able to control the direction of the foundation
• What is the foundation’s mission and how can it best be fulfilled?  If the mission includes family involvement that could imply a stronger effort toward including the family in governance. 
• How many family members are in a position to serve on the board?  What is their experience, interest and availability?  Foundations need committed board members who provide leadership and attention.  If family members are not in a position to do that, the most important responsibility of the board and family is to identify people who can.
• Does the current level of family involvement work or do you need to make changes?  If you need to make changes, do you need to also consider changing the legal structure?

Some families invite the extended family to a regular update on the activities of the foundation. Interested family members can stay in touch with the foundation and its legacy even if they are not directly involved in it.

Kelin Gersick’s book mentioned earlier – Generations of Giving – is an important starting point. Other helpful (and concise!) resources available in the National Center’s Family Philanthropy Online Knowledge Center, include:

• “Governance: Vision, Trust, and Moral Imagination in Trusteeship,” from Splendid Legacy: The Guide to Creating Your Family Foundation
• Families in Flux, by Deanne Stone
• Sustaining Tradition: The Andrus Family Philanthropy Program, by Deanne Stone
• Opportunities for the Next Generation to Learn About the Foundation, by Alice Buhl
• Family Foundation Staffing Models, by Alice Buhl

About the Author

Alice Buhl is Senior Fellow to the National Center for Family Philanthropy and its Board of Directors.  She was a founding board member of the National Center for Family Philanthropy and led the development of the “Pursuit of Excellence” assessment process. Alice is a Senior Consultant for Lansberg, Gersick & Associates.