How can philanthropy benefit your family business?
Family business philanthropy
Implementing a philanthropic strategy in your family business benefits your local community, the global community and your family.
Taking a philanthropic stance benefits your community or global communities, depending on how far your philanthropy extends. But it also benefits your family. Family business philanthropy is a fast-evolving field. The level of philanthropic engagement grows each year around the world. Whilst family-owned companies continue to play an important role in the economy there is also the ongoing challenge of succession to the next generation.
The themes of transition and governance are imperative. Every family business should have a long-term vision that ensures that future generations benefit from it. This is where family business philanthropy comes in.
As more and more family businesses are playing in the global space, they are also developing a greater global commitment. In which case, it makes sense to seek a more international approach to philanthropy, over and above any charity work for local communities.
Family philanthropy mirrors the family business
The impulse to engage in philanthropy is often initiated by one member before it grows into a family project.
Why involve the business in philanthropic projects in the first place?
- It helps to nurture the family legacy
- Help strengthens the bond between the members across the generations
- Involves the next generation, the future of the business.
Let’s talk about this in more detail.
Taking care of the legacy
The long-term vision of most family-owned and run businesses is to create value and wealth for their descendants and for society as a whole. As a business owner yourself, you are well aware of this. The entrepreneurial spirit behind family businesses suggests that the family wants the next generation as well as the community to benefit from its success. Philanthropy is a wonderful expression of both personal and spiritual values. As well as giving back to the community, it also leaves a strong legacy.
Strengthens the bond between members
Done well, philanthropy can become the common ground between parents, their children, partners, and grandchildren in a project that is outside the business. It provides, by its very nature, a wonderful opportunity to unite members, enabling frequent encounters, dialogues, and exchanges of shared altruistic interests.
Involves the next generation
Philanthropy also provides the opportunity for personal growth, and can bridge geographic distances as well as generational gaps. It is a great learning tool, helping to accustom the next generation to share their resources and giving them the opportunity to do so.
- Philanthropy helps the next generation have a positive modus operandi and it also shapes personalities
- It helps teach the next generation how to defend its point of view within the family
- Teaches the next generation the value of money and how to work together
- Drives home the importance of wealth management
- Helps the younger generation acquire practical skills and develop an entrepreneurial attitude.
You might want to have a separate next-generation fund that allows your children to allocate smaller grants to their individual philanthropic choices. This helps to make the next generation more responsible and also confident in its business activity.
Be good at doing good
Regardless of whether the work is philanthropic or pure business, it is essential to maintain professional standards, particularly where families have built their business successfully.
Take a stand. Being philanthropic is also about taking a position on what you consider to be the right course of action. And it is about choosing trustworthy partners who share your choices and beliefs and can help optimise the impact of a donation. They will be part of a rewarding and challenging experience, so make sure your interests are clearly defined to ensure you get the best suited partners.
Have the right tools
Philanthropy, by its very nature, demands greater transparency and accountability. It also requires that you have the right tools for project management. The latter is a complex process that involves multiple stages. These include the planning of objectives and results, based on the predictability and sustainability of a project.
By defining a specific project within the chosen organisation, you should get to know the partner organisation better and start to build trust for greater impact.
Make sure there’s always a way out
You should have an exit strategy that takes into account the end of a support cycle.
The exit strategy allows for a project planning phase of usually 3 to 5 years. When you finalise this phase, you should do an analysis of the challenges, failures and successes of the project to determine what can be done to improve it in the future.
By the end of a project cycle, you will be in an excellent position to decide whether or not you wish to renew your support for the project or next phase of the project, or whether you wish to retract from the organisation, having contributed to a significant and lasting impact.
How to leverage your philanthropic engagement
Your family dynamic, together with your available resources, need to work together to achieve full social impact. Time is often a constraint, and financial resources limited. So it is important to do the following:
- meet with peers – this can result in shared inspiration
- go to gatherings that are exclusively for families engaged in philanthropy – this allows you to learn about the modus operandi of other families and to discuss pertinent issues such as strategic funding, family dynamics, etc
- enrich your philanthropic engagement through sharing your experiences with your peers.
Get the support of professional advisors
Advisors help you figure out what you can expect from the various projects that are presented to you in the hope of being taken on as your philanthropic cause. More importantly, the advisors share their experiences with you. Learning from the experiences of others is an important part of philanthropy. It’s also important that you allow your initial vision to evolve.
You may wish to keep the family philanthropy separate from the company policy on philanthropy, so that the one does not succumb to the constraints of the other, even if they have similar values and motivations. In this way, neither the reputation of the family nor of the business is at stake, should either of them be subjected to criticism.
Some of the newest trends in family-business-led philanthropy include:
- learn from others
- get professional advice before taking on a project
- involve the next generation in this part of the business
- be pro-active
- bring on donors and social enterprises as partners
- have specific objectives to create impact and make sure these are aligned with those of your partners.
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