Working Towards Foundation 2.0: Professionalizing Your Family Foundation

a cup of coffee sits next to a notebook and pen on a wooden table

Creating and running a family foundation can be rewarding and impactful. However, when a family foundation grows and hires non-family or family staff to operate the organization, it is imperative that systems are put in place to professionalize the foundation. These systems will introduce clarity and objectivity in decision making, reduce potential conflicts, and ensure the foundation follows best nonprofit practices. This foundational work, though time consuming, can create an effective organization with greater accountability and fewer challenges.

While there are many steps foundations can take to professionalize their growing organization, including consulting a lawyer and an accountant on all legal and financial matters, below are three crucial tasks that foundations should consider:

1. Create a Board of Directors, ideally comprised of some non-family members.

A board with non-family members serves several purposes. Non-family members can diversify the board composition and reflect the unique skill sets, knowledge base and varied viewpoints needed for the organization. It can also create a buffer, shielding staff from family dynamics. This is particularly important when family members are staff.

In addition to the other roles they play, the board will be responsible for chief executive performance reviews and setting compensation. Creating a board comprised of non-family members, some of whom will form an Executive Compensation Committee or similar, is essential when family members play the role of chief executive. This will ensure that the foundation complies with IRS policies regarding a disqualified person.

2. Clearly articulate decision making.

Decide who will be involved in decision making and how decisions will be made. During this process, it’s important to clarify which decisions the board will make and which staff will make. Central to this process is understanding the oversight role of the board and the day-to-day management role of staff. For example, the board may be tasked with approving the annual budget, but once the budget has been approved, staff leadership will approve individual expenditures in alignment with that budget.

Decision-making policies and procedures are vital to ensuring smooth operations. For example, will your foundation make decisions by majority rule or consensus? Once you decide how decisions will be made, ensure your bylaws reflect that and document procedures in your board governance policies.

3. Professionalize all aspects of organizational operations.

When starting a foundation, it’s easy to focus on what is considered the “real work” of the foundation rather than setting up the organizational structures that will sustain the work. This crucial work includes defining the roles and responsibilities of the staff and board, developing comprehensive written job descriptions for all staff members, creating an organizational chart with reporting structures, and creating a performance evaluation process. In addition, setting clear deliverables for staff members with defined timelines will ensure both board and staff can track progress.

Growing a foundation can be an exciting endeavor. If this process is done thoughtfully and considers the aforementioned tasks, you will reduce conflicts and set your foundation up for success.