This month’s Family Giving News feature article is excerpted from the newly released Passages Issue Brief detailing the story of the Irwin Sweeney Miller Foundation, whose third generation board members made the strategic decision to spend down with assets of approximately $25 million.
The ISMF story is different from many spend down stories in two important ways:
First, the decision to spend down had not been suggested or implied by previous generation donors Nettie Sweeney Miller, Clementine Miller Tangeman, J. Irwin Miller, and Xenia Miller.
Second, the decision was driven by the possibility of making a significant difference in Columbus, Indiana, the family’s historic community, even though only one of the six current generation families still lived there.
Inevitably, family foundation spend downs involve a struggle between different beliefs about potential “goods.” Some families do good by continuing the foundation over the years and growing the assets. But that approach isn’t for everyone. Some families would be more effective if they considered a creative and strategic spend down, as did the Millers.
Some families don’t have the interest, experience, or time to continue a foundation from one generation to the next, even if they have good working relationships. However, one of the important learnings from the ISMF experience is that even families with some strained relationships can often work well together for a defined period of time around a specific cause or project. The Columbus community has benefited enormously from the willingness of the Miller’s third generation to respect the family’s legacy, think strategically, work with each other and the community, and ultimately make critical decisions about the future of the foundation.
Although this story is about spend down, it is also about two other issues that have a broader application to family foundations. According to reports from the affected nonprofits, ISMF closed out grantmaking for individual grantees with thoughtfulness and respect. Other foundations that are changing grant focus or phasing out long-supported organizations can learn from the way that ISMF communicated with and prepared their grantees. Second, the ISMF board chose to focus their efforts and significant dollars on a major project in Columbus, the donors’ hometown. Family members looked carefully at the kind of giving that had been important to the donors, discussed the legacy they wanted to add, and agreed on focusing the foundation’s remaining resources. The ways the foundation chose to support a major community effort can be instructive for others whether or not a foundation is spending down.
The Miller family graciously agreed to document this process and talk with me as I was putting their story together. I believe that their experience might help other family foundations, particularly smaller ones, think about spending down, phasing out grants, and strategic grantmaking. The full edition of this Passages Issue Brief, available here, describes both the early phases of decision-making and the steps taken to implement the spend out. This excerpt focuses on the three areas of substantive work accomplished during the spend down, along with reflections and comments from interviews with family and community members in late 201, as the foundation was in the final phases of shutting down.
CREATING AN ENDURING LEGACY: THE COMMONS AND DOWNTOWN COLUMBUS, INDIANA
A visitor to downtown Columbus sees a very different picture today from the one he or she would have seen in 2005. The central Commons building has been updated from the previous aging structure and is a thriving community gathering place with a very popular indoor playground. Parking is readily available, and there are new restaurants, a new downtown hotel, and people walking on the streets at lunchtime and in the evening.
The Foundation’s Initial Strengths
Everyone I talked with agreed that this change in downtown Columbus wouldn’t have happened without the Miller family’s focused investment and leadership. Certainly many others contributed to the changes. But the role of the family and foundation were key and essential. There were a number of factors that put the foundation in a position to play this central role:
The community was in the process of a study about what was needed in the downtown. This study, co-chaired by Will Miller, the youngest of the five third generation family members and Chairman and CEO of Irwin Financial Corporation, allowed ISMF to respond legitimately to what the community said it wanted, rather than be seen as deciding for the community what was needed. Will’s role in the community made his leadership significant and critical.
- The family and ISMF were widely respected for their long history of philanthropy and leadership in the Columbus community over several generations.
- The foundation staff was experienced and trusted in the community. Sarla Kalsi—president and CEO of the family office and executive director of the foundation for 36 years—was widely respected and very experienced. Sarla served on committees and led efforts for change. She was able to solve problems and suggest options when things got stuck, as they can often do in a community with many differing interests and perspectives.
- Mrs. Tangeman, a second generation family donor, had left the foundation a number of pieces of property downtown, some of which were leveraged to provide support for the new efforts.
- The family felt responsible for the Commons. They recognized that it had become more of a liability than a strength downtown and, in the tradition of the family, they were willing to invest foundation resources in a first rate architect (Koetter Kim & Associates) to do the initial planning for revitalization of the downtown and the Commons Mall.
Other Factors that Led to Success… And Some that Slowed Progress
There were several other critical factors that ultimately led to the successes in Columbus:
Cummins Engine Co. respected the work that was going on in the community and recommitted to Columbus as a training and resource center for its employees worldwide, ultimately locating several hundred additional employees in a new office building in the downtown.
- The mayor, City Council, and Downtown Redevelopment Commission were all willing to be creative in their approaches to redevelopment and their use of public money, land, and resources.
- Many community leaders were willing to provide support for solutions and parts of the renewal.
- Foundation contributions were a significant, but ultimately small portion of the more than $141 million invested in downtown projects from 2008-2013. Public funds provided more than $26 million, private sources over $109 million, and ISMF approximately $11 million.
And there were factors that significantly slowed progress:
- A major retailer who was unhappy with the downtown redevelopment plans filed for an injunction.
- A group of taxpayers protested against the city’s proposed tax increase to pay for The Commons, and it was eventually defeated.
The story of Columbus’ redevelopment deserves its own documentation and analysis. My purpose here is to show the role of the foundation and the family in the change so that other families considering a major project might learn from this example. Many community members noted that this change could not have happened without ISMF and family leadership:
“ISMF leaders had a vision and they made an investment… they were smart enough to bring the right people in the room. The city, county, private, and public all came together. They were the initial catalyst. They collaborated with other existing foundations and asked: how can we work together for the community? You felt as if you weren’t alone.”
“ISMF staff has special abilities, rallied others to the cause, underwrote the cost of studies, so that information was available without first reaching a public consensus. They were willing to make decisions. They listened at every step of the way.”
But family members also know it wouldn’t have happened without the involvement of many others, and a bit of luck, as one said. Other contributing factors to the success of the project included:
- ISMF trustees made a clear commitment to allocate significant resources to the downtown and made their commitment public. This action provided support to the work of the Vision 20/20 group and made the potential changes seem possible.
- ISMF often paid for the studies that made new options or ideas viable. They supported the Vision 20/20 strategic planning effort and two major architectural studies by Koetter Kim & Associates.
- At each step, a clear communication plan was developed with messages and spokespersons.
- The trustees were willing to take risks, often by becoming involved in rather complex property and equity arrangements. As one trustee put it: “We provided the risk capital. The downtown redevelopment plan was predicated on the idea that the governmental and philanthropic dollars would be used to bear the risks that the market itself would not cover, to the point where it would create a critical mass, and money would come for investment through the normal market mechanisms.”
- ISMF trustees were able to keep the vision or end point in mind and were flexible as situations and possibilities changed: “We followed the traditions of the foundation to listen to the community rather than impose what we wanted to do.”
- Part of the ISMF tradition was to invest in outstanding individuals. This continued as the staff identified partners and resources that would provide leadership to various parts of the redevelopment: “In a normal market we would have said, ‘let’s put the hotels at the interstate, the return on our investment appears better.’ By providing the land and finding Tim Dora, an experienced hotel developer and operator who was willing to take an extra level of risk to put in place the first downtown hotel, we created a changed picture that began the process of allowing people to understand what the potential in this plan really was.”
- The staff worked closely with a very able Redevelopment Commission that was also willing to think creatively about the use of resources.
- The Columbus family members, Will and Lynne, plus the staff, were available to meet regularly with key people and be directly involved in discussions and decisions. Other family members participated in the decision-making at key times so the community saw their clear intention and support.
- Board members (including the in-laws) brought many talents to the table. There was experience in the law, architecture, and economic development. They cared about Columbus and were willing to get involved.
FAMILY REFLECTIONS ON THE SPEND DOWN
Family members reflected on their decision to make a strategic investment in Columbus and spend down the assets of the foundation as well as their experience in the process:
“We actually ended up having a pretty good time on some of these things, (such as) meetings with architects. We had some disagreements, but for the most part those were handled well. All and all we were becoming more and more skilled in dealing with each other. I thought it was going to be a pretty miserable experience, but it wasn’t.”
“Principles were laid down early. The family splitting up the money doesn’t make any sense in our mythology. It isn’t your money, so it doesn’t compute. If that mythology isn’t already there, making it up from whole cloth would be tough.”
Although all board members were initially supportive of the decisions and direction for the future of the foundation, one sibling eventually became unhappy with what was being done. Hugh Miller said, “in retrospect, we could have done much more with those funds if we had broadened our vision and scope to see beyond the minimal agenda of getting out of town.”
The hope of some family members was that the work with the foundation would also help family members work with each other more productively on issues related to the family home and estate. Although everyone believes that was true to some extent, Hugh became alienated from the family after he filed a suit to contest how his mother’s affairs were being managed following his father’s death and ultimately the management of her estate as well. He also resigned from the foundation board in 2010. Again, Hugh’s reflections:
In a situation like this, where it is a new generation taking over, you inherit some of the good ideas, the publicity of the successes, but you also get their way of operating and set of problems that their ways of thinking never solved.
I also asked what advice family members would give to other family foundations facing similar divisions among siblings that emerge following the death of their parents:
“Hire an outside consultant who can help work out issues. Go with the flow; do what’s practical and what’s feasible. Respond to your own circumstances. Look around to see what you can do.”
“Honor your past but don’t be bound by it. Times change. We wanted to honor the legacy in a way that allowed us to close the foundation. Not enough people think about spending down, balancing ongoing operations versus having a big impact.”
“In the context of your own family you have to make sure there is a process that includes everybody’s voice. The definition of consensus which you [the consultant] gave us early on was really helpful. The hard question is, can you find the common denominator, a substantive place where everyone can see value. Place based philanthropy, knowing the players, and finding a moment in time where there was a big opportunity to make a difference.”
Advice from staff: “Be the driver but do it in the background. Be as inclusive as you possibly can. This is really hard work and can be easily derailed; it’s not for the faint hearted. Takes a long time, and requires stick-to-itiveness.”
FINAL OBSERVATIONS AND SUMMARY
One of the things we know about family foundations is that a family’s history and culture often play a very important role in the direction and governance of family foundations. The Miller/Tangeman family’s style was to emphasize leadership (and funding) by the senior generation. Although the next generation was included on the foundation board, they were not involved in significant ways in the foundation. J. Irwin Miller didn’t prescribe future leadership for the foundation, but he passed on most of his other leadership roles to his youngest son, Will.
When the time came for their leadership in the foundation, the siblings had very little experience at working together. Several had gone to boarding school so hadn’t even shared many growing up experiences.
The family placed a high value on philanthropy and taught it by example to the next generation. But J. Irwin Miller’s way of managing and running the foundation did not give the next generation experience in working together in philanthropy.
In addition, a philanthropy style that expects each generation to contribute to its own causes may tend to lead toward family members doing separate rather than joint philanthropy. In a note in 1996, J. Irwin Miller said that the family and foundation had contributed over $146 million to philanthropy.
The family tradition was for family members to fund and lead philanthropy efforts in their lifetime. This mirrors the trend today of donors being more active in philanthropy while they are alive. It might be argued that although there was no suggestion of spend down by the previous generation, their model of grantmaking was consistent with spend down: spending the money given by the previous generation in ways that was consistent with their grantmaking. Families continuing over time usually find ways to respect the values of the previous generations while interpreting the grantmaking in ways that reflect current family interests and community needs.
For the Miller/Tangeman families, legacy was very important. The ISMF board took the interests of the donors very seriously in its spend down. Anyone looking at the history of J. Irwin Miller, Xenia Miller, or Clementine Tangeman would see that ISMF’s leadership and strategic funding for Columbus was very much in the pattern and character of the donors. The Columbus, Indiana community has benefited enormously from each generation of the family’s philanthropic leadership. I didn’t know the Millers or Mrs. Tangeman but can only imagine they would be very pleased and proud of the contribution of their descendants.
For additional information on the topic of spending down and limited life foundations, please see the Content Collection, Ending Well: Exits and Spend Down.