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The most energizing part of your succession plan

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As your business matures, you must coordinate succession in management with succession in ownership—and philanthropy.

By Ellen Frankenberg

In her 2003 book, The Greater Good, historian and educator Claire Gaudiani describes philanthropy as a “social investment” designed to offer those who have less the opportunity to contribute more to our economic growth. In the U.S., she writes, “citizen generosity has created a social environment where capitalism could flourish without destroying democracy.” Our cities have been built through philanthropy—homes, schools, universities, museums, hospitals, churches and synagogues, as well as civic buildings of every size and description. We have all been enriched by others’ investments in the ideas, inventions, innovations and institutions that have transformed our society.

As your family business matures, your succession planning will evolve on many levels. Succession in management must be coordinated with succession in ownership and in knowledge, as well as in philanthropy. If you have been personally generous, who in your family will continue to support your “social investments”? What is the legacy that you and your family want to leave in the community that has supported the growth of your company?

How much is “enough” for children and grandchildren to enjoy productive and creative lives? At what point will wealth become a disincentive to those who have never worked for it? How do you engage your children in sharing with others whatever your family determines is more than “enough”? Which values do you want to express through charitable giving?

Bill Gates, arguably one of the most successful entrepreneurs of our times, has decided to limit the inheritance of his three children and to focus much of his considerable energy and intellect on philanthropy. The Bill and Melinda Gates Foundation ( supports philanthropic initiatives in global health and learning “to reduce inequities and improve lives around the world.”

As Gates has demonstrated, philanthropy can become life-giving, not only for the recipients but also for successful entrepreneurs who discover new mountains to climb, for example, fighting AIDS in Africa or redesigning Chicago’s public schools.

How many successful American family businesses can you name that transformed themselves over generations into significant foundations? Think Carnegie, Ford, Kennedy, Kresge, Mott, Rockefeller. Philanthropy eventually became their family business.

A philanthropic plan

Even if you don’t consider yourself in league with the Rockefellers, you can develop your own philantropic plan by following these practical steps:

1. Start early by talking about core values. How do you answer your kids’ questions when they see a homeless person? How often do you talk about investing in research to overcome Alzheimer’s or cancer or autism—especially if these conditions have already affected your family? Can you get your teenage grandkids to turn off their iPods long enough to volunteer at a soup kitchen? Building a house with Habitat for Humanity can help family members to build a new kind of teamwork.

2. Determine who is motivated and competent enough to help develop your philanthropic plan. Philanthropy provides a way to involve capable members of the family who will never run a machine shop or sell widgets. Your daughter-in-law the nurse or your son the art teacher may develop leadership roles in philanthropy that enable them to share their competencies within the family circle. Family members may choose the chair of the philanthropy committee, and other members may gradually join. Most businesses get hundreds of requests each year for charitable contributions. A philanthropy committee can relieve management of this task, once guidelines have been developed.

3. Bring the family together to discuss their priorities. The discussion about how to focus your contributions will help you discover what your adult children value most and will help build bridges between family members who work in the business and those who do not. Employees who know that the family has commitments beyond their own pockets will be more motivated to ensure profitability.

4. Consult your legal and financial advisers about how to draft the right documents, and perhaps enjoy tax advantages too. Community foundations that manage many donor-directed funds—such as the Greater Cincinnati Foundation (—can provide guidance. The National Center for Family Philanthropy ( provides research and practical information. The key is to learn what you can but keep it simple, especially in the beginning, until you have clarified which approach works best for you.

5. Develop skills to work through conflict productively. Members of any group developing a plan together, especially one that involves money, will not agree on everything. The challenge is to find ways to manage conflict productively, so it becomes a source of new ideas and energy. Setting up guidelines for fair communication (everyone gets equal “air time,” no interrupting, no putdowns of others’ ideas, no statements about another’s motivation, etc.) may reduce stress in the long run. Guidelines like these may improve family communication in other settings, too.

6. Write a mission statement that will become the basis for your philanthropy strategic plan. Groups that write down the outcomes of each meeting will be more efficient and will avoid a continual rehashing of the same tired ideas. One family signed off on the following statement: “We will contribute 5% of our business profits each year to organizations that develop housing for first-time homebuyers in our county, because we believe that home ownership builds stronger families and more stable communities. Our philanthropy committee will review applications and select proposals that demonstrate competence, assign appropriate dollars, and systematically assess implementation. On an annual basis, they will report back to the Family Forum what has been accomplished.”

7. Define policies, procedures and responsibilities. What is the procedure for requesting a grant? How often will the committee meet? Will requests that also promote the business be given priority? How will political or religious donations be handled? Whose alma mater will get funded first? How will grants be evaluated? With widely scattered families, philanthropy may become the best “excuse” for getting together regularly and accomplishing something beyond watching a football game. The whole family might define the focus of their philanthropic activities and defer implementation to a committee.

8. Build long-term structures for governance. If you have a family foundation that distributes thousands of dollars each year, professional accounting practices must be implemented. Eventually the family may appoint some members to a board that will manage their philanthropy, perhaps including some outside advisers with experience in charitable giving or other business leaders who have successfully developed philanthropic projects.

Values-based giving

One family business I know has decided to keep its philanthropy anonymous. Their goal is “to help children who are abused and neglected and point them towards a life centered in Christ.” They earmark 10% of their annual profits for their foundation, and contribute to ten to 15 organizations sponsored by various Christian denominations that work to meet children’s “physical, emotional and spiritual needs.” They review each entity’s financials annually and visit the facilities regularly. Since 2000 their business has generated $6 million for this cause, which is grounded in the family’s core values. The board that implements their philanthropic plan currently includes three members of the founding family, two in-laws and two employees of their company.

Long ago, Sigmund Freud wrote that the essential qualities of a healthy life include only two simple abilities: “to love and to work.” Family philanthropy provides the opportunity to do both—to reach out with those you love most to help those in need, and to do good work that will make a difference. Philanthropy provides one more way to ensure the continuing economic growth of our democracy, the endurance of your family’s core values and the opportunity to include more family members in an enterprise that may bring more joy to those who give than to those who receive.

Ellen Frankenberg, Ph.D., is a consulting psychologist who works with family businesses in transition and counsels them in the development of succession and philanthropy plans (

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