Planning for an Influx of Assets

An influx of assets is a powerful transition point in your family’s philanthropy. With rising resources comes the budding potential to do more of what you’re already doing – or, perhaps, to try something new. Either way, additional resources will often provide your foundation with new options for making a difference according to your foundation’s mission.

With more money comes opportunity as well as challenge. For family foundations—particularly those for whom the influx comes as a complete surprise, or who haven’t planned in advance—a change in asset size can feel downright disorienting.

This issue of FGN shares suggestions for how your governance policies and practices may adapt to an influx of assets, featuring an excerpt from our forthcoming Passages Issue Brief on this topic. The full issue brief, coming in September 2015, will include guidance and discussion questions for how to prepare for the many changes that take place in all aspects of a foundation due to an influx of assets – from grantmaking strategy, style, and process, to communications with grantees and the local community, to changes in staffing and investment policies and practices.

Planning to plan

An influx of assets is a tricky thing to gauge. Often, it comes at a time of death or big change, and that’s hard to plan for.

If you’re talking about a smaller increase, the changes may not be a big deal. A new staff member, for example, or refreshing the foundation’s website. For a more substantial increase, however, a foundation might create a whole new identity and enterprise—with more grants, more staff, more structure, and new strategies.

Any way you look at it, an influx affects business as usual—and your foundation must learn to adapt to the change.

Are there ways to create new board policies and practices as you plan for an influx of assets to help the transition go more smoothly when it occurs? Yes! There may not be a one-size-all solution; however there are steps you can take to help your family prepare for the transitions ahead, and cope with challenges as they come up.

So where do you start?

An influx of assets, especially one that is substantial, touches every part of the foundation and what you do in it. Grantmaking and governance, investments and operations, office space and staffing—these all will likely shift to accommodate the new level of wealth.

There’s more than one way to plan for an influx, and no way is the right way—it’s just the way that works for you. Here is one pathway:

  • First get clear on the voices that matter in this planning process. Who is in charge of planning? How can you solicit and hear everyone’s voice that matters? “Voices” likely include the current board of trustees, the “voice” of the major donors (interpreted by family members, if the donors are no longer alive), the foundation’s professional staff (if applicable), and the community (allies, grantees and the public).
  • Next, go methodically through every aspect of your governance, grantmaking, and operations. Ask yourselves time and again: how will the new asset level affect this area of our work, and what do we want to do about it? How do we approach making this decision? What support or additional information do we need?
  • Remember, in times of change, go back to your mission and values. They are likely the reason you got into the foundation in the first place. Get them clear, make sure everyone agrees, and revisit them, time and time again.

Considering new board policies

The story of one family foundation board goes like this:

The family never worked together before the increase in assets: They came on board after the benefactor died, and it’s been hard to get them on the same page. Some of the board members want to be strategic, and others just want to write checks to their pet projects. They still have some confusion about it being “their money” to direct as they please. Educating them up front and setting policies about what it means to be on a foundation board would have been so helpful.

There’s a lesson in this story. If your foundation already has governance policies in place—such as who is eligible for board service and what the qualifications are, how board membership is divvied up among siblings and family branches, terms and rotation, and clear trustee roles and responsibilities—fantastic. You are ahead of the curve.

If you don’t have these policies yet, an increase in assets is a great time to set them. According to one foundation executive director, “I came on as the first staff member, and within, the first six to nine months, created an entire set of policies and procedures with the board—everything from how we accept applications to a disaster response plan.”

If you don’t have an idea where to start, you might call on a qualified consultant to guide the board through this process, or form an ad hoc governance committee that can lead the way. You can also seek the advice and sample policies from your colleague foundations or NCFP for ideas on how others do it.

The point is, having clear policies and procedures in place will save a lot of headaches down the road.

“The biggest challenge I see families face in a growth period is when there are no rules around succession—how trustees will be selected and serve. If the founder doesn’t set these rules in his or her lifetime, it can lead to rivalries and fights about who gets seats on the board when the assets double or triple,” says philanthropy advisor Mark Neithercut.

A board may be able to get by with more relaxed rules when it’s just Mom, Dad and two siblings at the table. But as the foundation grows—both in assets and in board size—nothing will serve your board better than to have clear policies in place.

Board meetings

When planning for an imminent influx, you will find the board needs to meet more often. Early on, for example, it’s not uncommon for a foundation in influx to meet monthly, simply because there is so much work to do, and it’s critical for the board to be fully engaged in the planning process.

Of course, for boards that are geographically dispersed, face-to-face meetings might not always be feasible. In this case, the board can participate in a few face-to-face meetings per year, and the rest through video-conferencing.

New governance structures

If there’s a rapid and significant increase in assets, a foundation needs a board that is fully engaged and available. This might mean instituting new committees or other governance structures on the board.

According to one director whose foundation doubled in less than a year, “We experienced so many changes, so rapidly, and with a geographically dispersed board, there was not enough board engagement. We as staff did our best to keep them informed, but it was difficult for them to keep up with the number of changes and why we needed to implement them.”

As a result, it left trustees feeling out of the loop—as if they didn’t fully own the transition.

“If we could do it again, we would change our governance structure—adding a ‘transition committee’ or some other structure to communicate better with the board. Having a committee like this would engaged them and helped them understand the operational and programmatic impact in this short period of time. “

The Satterberg Foundation, based in Seattle, changed its governance structure, but for a different purpose: to keep the family front and center. The board added grants committees for each of the new strategic funding areas. Each committee comprises one staff person, two board members, and three family members, including the younger generation.

According to executive director and family member Mary Pigott, “This new structure has enabled us to more deeply involve our family. We now give kids and grandkids an opportunity to serve on a grants committee and make decisions. They gather in our office, eat chips, and discuss the merits of this grant proposal over that one. In return for their service, they can nominate one organization of their choice to receive an honorarium. Our hope is to engage them in the process, so that they, then, go tell their cousins: hey, you can do this too.”

On governance—ask yourselves:
  • How can we make sure the board is fully engaged in planning for this change?
  • What policies do we need to put in place to bring clarity the board, now and in the future?
  • How often should the board be meeting during this transition?
  • What committees or other governance structures (e.g., committees or advisory roles) could support the process?
  • What tools can the board use to streamline the planning process (e.g., board portal on website, document sharing tools, etc.)?
  • What support does the board require during this transition, and where can we find it?
  • How can the board and staff communicate more effectively?

Additional advice from your colleagues

For many of us, thinking ahead to the future does not come intuitively—especially when it involves a future without our beloved family member or a business that has been around for decades. Thinking five years ahead is a challenge, and 10 years feels like an eternity. Here is some advice from your colleagues who have been through an influx.

  • Talk with the founders. If at all possible, be sure to get as much information and guidance as possible from the founders. Create a video, record their voices, and ask as many questions as you can before it is too late.
  • Plan early and often. It’s easier to plan ahead than to react in the midst of an imminent or overwhelming change. One way to plan ahead is to constantly refine where you are at today with your grantmaking and operations. How will it change with a new level of wealth? Together imagine the new possibilities.
  • Start learning now what you don’t know. Even if there are tax consequences for transferring the assets before you are ready, it might be worth it to learn what might help you later.
  • Revisit your mission and goals. Many funders use transition points to examine what’s working well (and what’s not), and if and how the mission is still relevant to the family and the community needs.
  • Focus your grantmaking. Many colleagues encourage foundations to use the asset increase to focus their giving, as opposed to opting for the trustee discretionary model. As one trustee says, “With this new pot of money to focus on, you could go on a powerful process learning together and identifying shared values.”
  • Find wise advisors. You don’t have to know it all. You just have to know an advisor is serving you well. If the foundation has an advisor that is not a good match, end the relationship sooner rather than later.
  • Engage consultants who can guide you through the transition. Working with consultants is a commitment that takes time and dollars, but it can help you navigate the process with far better results. Think of it this way: it could take your board five years to make all the changes you need to make, or you could hire a consultant and do it in two.
  • Reach out to other funders and grantmaker support organizations. Other foundations and organizations like the National Center for Family Philanthropy can help you think through the issues and provide sample policies and procedures. As one trustee says, “We made sure we had membership in place to provide us advice on infrastructure and offer a network of support. Being open to support is really important.”
  • Allow change to happen over time. An influx of assets, and all the changes a foundation must make because of it, isn’t something that happens overnight. Just as you don’t see immediate results of a grant, don’t expect to see immediate results from a foundation in the midst of change. As one trustee says, “As foundations, we get to try things and see how they work. This takes time. You have to live into it.”
Looking for additional advice? For more tips and tools on planning for an influx of assets, register for our September 10th webinar, Planning for an influx of assets, featuring the article author and the family leaders of two family foundations who have been through, and are still in the midst of, an increase in assets.