Philanthropy and the family-owned business
Let me introduce myself: My name is Ellie Frey and I am the new director of the Family Business Alliance. The FBA’s vision is that the members of every family business in West Michigan have the strategies, tools and techniques to succeed generation to generation.
I am often asked by the next generation of family-owned businesses about the role of philanthropy within a family. According to national statistics, confirmed by Grand Valley State University’s Family Owned Business Institute study of West Michigan businesses, 80-90 percent of businesses identify themselves as a family business. It’s safe to assume that a lot of philanthropic dollars are created by the success of these businesses.
Being a third-generation member of a local family foundation established by my grandparents in 1974 and endowed in 1988, I can attest to the value of philanthropy in a family business. The money used to fund the foundation came from the worlds of banking and insurance; our family went from having a business in which several family members worked hard, to a multi-generational family philanthropy business in which almost everyone in the family participates. We have 13 family members, not including the amazing staff, around the boardroom table.
Having 13 people involved in this process can be challenging. Still, we have learned to work together, and more importantly, we have learned that we share values as individual members of a growing family. The business of philanthropy has not only affected my life, but the lives of those I meet. So many West Michigan parents and grandparents engage their families in some form of philanthropy. It can take the form of church donations or mission trips, or taking in a friend or family member in a time of need.
According to the Council of Michigan Foundations’ Web site, most-often cited reasons for choosing to give include a feeling of satisfaction from helping other people, a wish to leave a lasting imprint on society or perpetuate your viewpoint or philosophy, giving back to a supportive community, and taking advantage of tax benefits for charitable giving.
For whatever reason you give, have you thought about engaging your family in your philanthropic activities?
The holidays, when we all are prompted to think about giving, are a good time for business-owning families to consider working together on their philanthropy. But it isn’t as simple as the family patriarch or matriarch sitting down after a family dinner and saying, “OK, now we’re going to do philanthropy,” and expecting the generations gathered to jump in with smiles and enthusiasm. Family members need to be genuinely involved in the process: They need to have some skin in the game, so to speak. The family’s values, not money, will be the most important contribution.
Philanthropy at its core is based on values. People give to causes they care about because those causes are aligned with their personal values, experiences and interests. A family looking to do something philanthropic for the holidays might start the process by discussing their values: What matters most to each member of the family? What “moved” them this year? Among these values could be faith, compassion, family, creativity, freedom or health, or they may have been touched by a current event, or local or global issue.
Further discussion should work to connect these values with actions that could be taken through philanthropy. For instance, someone who values creativity might want to support an arts organization; a family member who values faith might give to a faith-based nonprofit, church or synagogue; or someone concerned about families impacted by the economy might want to support a job-training program for parents with dependent children. By discussing family members’ values, each will have a vested interest in the outcome.
The mechanisms for giving depend on the family, its existing informal and formal supports, and the amount they wish to give. Options are plentiful and include agreeing on a few outright gifts to select nonprofits, giving each family member a “charitable allowance,” or matching each individual’s personal charitable gifts. To inform your decision-making, you can access information on a broad spectrum of local nonprofits and giving tools by calling your community foundation. Professional advisors should be consulted if you’re making large charitable gifts, or when you are ready to formalize your philanthropy through a private foundation or donor advised fund.
After you have ascertained your collective financial and volunteer-time budgets, family values and areas of interest, here are suggestions on activities you can do as a family:
Site visits to favorite community nonprofits: Two of my favorite memories growing up are of visiting the UICA and Gilda’s Club with my family. We toured the facilities, met the staff, and listened to stories from people who were touched by these organizations. It was a way to build a real relationship with these organizations. No longer was it just about a financial contribution; I could see the direct effect of my donation. Many nonprofits love to take folks on a tour of their facility (do call ahead); it’s a way to show off the organization and what they are passionate about. It’s a double plus if the family decides to make a contribution.
Volunteering: We all work hard in these economic times, but as one financial advisor suggested to his extended family, “Why not take the money we would spend on each other and donate it and our time to a soup kitchen.” Or maybe it’s heading outside to clean up a neighborhood park. Whatever it is, it’s not always about giving money. Often, volunteering time can be much more rewarding to the organization and the volunteer.
Skills and talents: Consider how your knowledge and training can help a cause or a charity you care about. As one second generation CPA wrote, “My dad over the years said that when you give to local charities and volunteer your time, it has a way of coming back, and for his sound wisdom we have been given a lot. We do a lot of work for several nonprofits, and how we find ourselves in these situations is from volunteering our time. No commercial advertising could have built our client’s confidence as a face-to-face conversation about everything except for business.”
Philanthropy provides an excellent training ground for family discussions about money. Giving away money takes discernment and teamwork, but it isn’t as likely to spark hot debates like issues of inheritance or business succession might. In addition, because philanthropy is personal, every family member is an expert on what matters most to them — the playing field is even, where it might not be when it comes to the decisions about the family business.
Philanthropy has the power to unite families, even those with diverse values and ideas. Whichever philanthropic avenue you choose, try to engage your family in the process. Very likely, you will learn something interesting and important about each other — something of lasting value.
Ellie Frey is director of the Family Business Alliance (www.fbagr.org). This column was written with support from Gina Bovee and Roberta King of the Grand Rapids Community Foundation (www.grfoundation.org).