The classic story:
Andrew Silver believed passionately in his TLC Foundation and its mission. While his four children had a vote in where the money went, he was, for all practical purposes, the only decision maker. His second wife of 12 years, Barbara, took a back seat and, unless she served on a board, rarely suggested new directions for gifting. For many years certain organizations could count on annual support because, if for no other reason, they had gotten it the year before. Andrew’s grown children (42, 44, 48, 50) came together every November to finalize the donation list for the year. Over time, and with the increased amount of money to be given, several new organizations, of interest to particular family members were added to the list but the “board” essentially was a rubber stamp for Andrew’s vision. The meetings were used in large part as an excuse for the family to get together before the holidays and do some skiing. When Andrew died suddenly 3 years ago, it quickly became apparent that the kids didn’t have the same connection with Andrew’s list of beneficiaries and wanted to make major changes in the direction of the annual gifts. Although only a simple majority was needed to approve each gift, their stepmother, now the new chair, didn’t want any changes in the foundation’s focus. She believed that Andrew’s vision should be respected and she did not want to disappoint those organizations who counted on their charity. The kids said she was “frozen in time” and a couple of them deeply resented her remaining on the board, let alone being the Chair. Two siblings wanted to support highly political international social activism which conflicted with the philosophy of the religious organizations currently supported, another wanted to become a major donor to several very local organizations in his town, and the fourth thought the foundation was too elitist and all the money should be given away. The November meetings ceased being a happy time where the family got together but instead became a venue for venting resentments and vying for power.
We understand it all too well:
Management of family foundations can be more complicated than almost any enterprise because of the role of entrenched family dynamics. Take the classic case of the transition process when the visionary parent is no longer in charge and the adult children, often very successful in their own right, find out that there are many conflicting points of view in that second generation. Once the leader is no longer there, power shifts from an individual to a group. And group dynamics are highly unpredictable. In family foundations this unpredictability is fueled by disparities in siblings’ world views, geographic locations and ranges of financial status. We must remember that even though adult siblings may be in their fifties and sixties, sibling order or perceived parental preferences carry the power they had at the dinner table or in the back yard decades ago. When money is involved the entrenched relationships coupled with repressed resentments make for difficult conversations that frequently end in lost tempers and the opening of old wounds. As conflicting issues come into play, giving away money, which seemed like a nice, altruistic, socially responsible thing to do, can become fraught with discord. What is at stake is more than the bounty awarded to the chosen institutions but the very health and future of the family system.
What should a family do?
Should one or two siblings be chosen to take the helm to navigate the foundation’s future? Should the assets be equally (or unequally?) divided into separate funds each independently controlled? Or should family members just grit their teeth and fight for what they want each giving season?
While there are no right or wrong answers for creating successful organization structures, family members can come to a common understanding of their mission and how their foundation will be administered, privately and efficiently, through the use of Seven Principles for Managing Conflict in Family Foundations. Once the decision making processes are put in place, the family can work within that framework knowing that while differences in opinions may persist, the resentments and jockeying for power will cease.
How does it work? The Seven Principles are:
1) Be transparent about personal objectives – Get them out on the table:
2) Agree upon a decision-making process – This can be the toughest issue.
3) Develop leadership roles – Decide what they are, how they will rotate.
4) Set meeting ground rules -To keep the meetings focused yet enjoyable:
5) Have realistic expectations – Accept that all decisions and their processes will not be harmonious.
6) Build some social time into each meeting – Having fun is the best tonic and makes for better more tolerant decision-making.
7) Treat all with respect – you are family after all. Model how you wish to be treated.
So now that you know what to do, how do you do it?
Some families can do it on their own. Others become so entrenched in their positions that they resort to litigation. Still others choose to adopt a facilitative model where a professional mediator or facilitator helps the family members express what’s important to them while preserving tenuous relationships. Once established, harmony can be maintained with periodic facilitator check-ins that last no more then an hour every few months.
The process generally begins with the mediator helping the individual family members articulate what they believe is most important to them within the context of the foundation and more broadly in the context of the family system. Once each involved family member has had a chance to be heard by the group, commonalities in addition to opposing agendas are identified and the group brainstorms ways that all interests can be met. This is not to say that a perfect solution exists or that it’s an easy process. As opposed to the family feuds we read about in the papers these discussions are private and there is no judge who determines the outcome. In mediated family meetings, the power rests with the family. The mediator does not decide who is right or wrong nor does he or she come up with the solutions or systems that will make the problems go away. Rather, the mediator helps the family generate ideas that are aligned with the interests that have been expressed. These solutions generally gain traction as they address the specific concerns of those at the table, not the precedents cited in case law that relate to a completely different family with completely different issues.
The bottom line is that a family grappling with decision-making challenges has virtually nothing to lose and much to gain by taking a facilitative approach to managing their foundation. Sustaining family relationships is vital to the ongoing functioning of the family foundation to say nothing of the family as a whole. The mediation process is ideal for situations such as these as it is private, efficient and effective. The seven principles listed above are the key to the success of managing family foundations and will help preserve their business as well as their personal relationships for future generations.
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