Family Philanthropists As a Group Command Incredible Wealth

Twenty habits of highly effective philanthropists and how you can service them.

June 19, 2008
by National Center for Family Philanthropy

"Foundations do not need a lot of money to be effective," declared philanthropy icon Paul Ylvisaker in his 1989 essay, Small Can Be Effective. "If, indeed, they were to exploit only a fraction of the strategies available to them, their individual and collective impact on American life would be vastly and beneficially expanded."

Ylvisaker's essay listed 20 functions of philanthropic foundations and funds. Only a few of these necessarily involved money changing hands. The remainder represented a call for foundations to initiate, invent, advocate, and, ultimately, to lead.

Money Matters

Family philanthropists as a group command incredible wealth. According to the Foundation Center, there were just under 34,000 family foundations in 2005 yet they collectively held $233 billion in assets and made $14 billion in grants. And this doesn't take into account the dramatic giving done by the nation's 107,250 donor-advised fund holders, the vast majority of whom are families.

Donor-advised funds collectively held $21.65 billion in assets and recommended $4.95 billion in grants in 2006 according to the National Philanthropic Trust, and even that addition wouldn't fully capture the "checkbook philanthropy" of everyday giving families looking to make a difference in the lives of others.

How these monies — and by extension, the opportunities and responsibilities they represent — are granted, invested and managed is of the utmost importance. Ylvisaker was quick to point to the financial tools available to make a difference: grant-making, lending, insuring and investing.

In a March 2007 report from the National Committee for Responsive Philanthropy, A Call to Action: Organizing to Increase the Effectiveness and Impact of Foundation Grantmaking (PDF), family foundations were among those cited for their excellent grant-making, particularly their willingness to fund core operating support.

Family funds and foundations have taken a lead in non-grant financial strategies as well. The New York-based F.B. Heron Foundation deploys 24 percent of its assets, 27 percent if you count grants as well, in service of its mission through its use of so-called mission-related investments. Others, like the Educational Foundation of America in Connecticut, employ socially responsible investment screens to ensure that all the foundation's assets are working for, and not against, their charitable goals.

Catalyzing Change

Giving families are pillars of their communities. Donors and trustees are surrounded by friends, family, business partners, political allies, colleagues, and neighbors. Actions taken by well-positioned families can catalyze a whole host of changes, simply through the network of relationships that are so important to today's giving families.

Ylvisaker called his next set of functions part of the "catalytic role" philanthropies could play: initiating, accelerating, leveraging, collaborating and partnering, and convening. Foundations, not having to answer to shareholders or voters, could act as "society's passing gear," spurring change here or speeding it up there.

In the 1990s, the William Caspar Graustein Memorial Fund commissioned a study on early childhood education in Connecticut, generating newspaper coverage nationwide. The Fund hosted community conversations and meetings to discuss school readiness. Due largely to the Fund's awareness efforts about children's needs, the state passed legislation addressing the issue.

In 2006, the Jonas Center for Nursing Excellence, a project of the Barbara and Donald Jonas Fund in New York, brought together leaders in health care, business, government, philanthropy, and media to discuss a number of issues facing the nursing profession and the state of health care in general: rising costs, pressure from insurers, managed care models, difficult work environments, unsafe patient-nurse ratios, a lack of diversity, and diminished professional satisfaction, among others. By encouraging collaboration and convening stakeholders, the Jonases hoped to create a whole community of "champions" for nurses.

New Ideas

In the realm of new ideas, Ylvisaker noted philanthropy's capacity for playing a "conceptualizing role" in society, for analyzing, defining and redefining, focusing and inventing and testing.

From the Dorr Foundation's promotion of painting white lines on highways in the 1950s to the Bill and Melinda Gates Foundation's fight against malaria, tuberculosis and AIDS today, family foundations and funds large and small have been at the forefront of support for new ideas and research.

But you don't have to be responsible for a yellow fever vaccine like the Rockefellers or a polio vaccine like the Scaifes. Foundations of all kinds accumulate incredible amounts of information about community needs and potential solutions in the course of their work. Simply making that information public in some way through annual reports, issue papers and online publications can help focus and refocus community priorities.

Family foundations and funds have a unique role to play in Ylvisaker's "conceptualizing role" because they are increasingly multigenerational enterprises. They mirror the rapidly changing society they seek to influence. Families feel the push and pull of rapid social change as they seek to engage a new generation of family philanthropists. Families can, thus, reduce the "lag in public perception and recognition" of which Ylvisaker speaks simply by identifying and acting on the changes they can see happening in their own living rooms.

Speaking Out

Families can most definitely fulfill Ylvisaker's "critical functions" of commenting, approving and disapproving, advocating, and gadflying.

It's a valuable message for philanthropies of all sizes, notes Virginia Esposito, President of the National Center for Family Philanthropy and Ylvisaker's student and biographer. "Giving families are perhaps overly modest," she says. "Too many of us think, ‘Oh, I couldn't talk to my senator.' ‘We couldn't convene a meeting.' We underestimate ourselves too often. There are so many things we can do for the causes we care about. Grant-making is only one of them."

Modesty and privacy certainly have their places in philanthropy. However, your opinions matter —to grantees, to other funders, to media, and to regulators. Comments from family philanthropists carry weight because they come from people who have invested their private time, talent, and wealth to do something for the public good.

Building a Community

Ultimately, though, giving families are, with their partners and grantees, striving to build a better community: bonding and unifying, balancing and, yes, leading.

The Clinton Foundation, for example, wanted to help provide AIDS drugs for patients in developing countries but didn't have enough funds to buy drugs at market prices and neither did those countries' governments. Instead of trying tactics such as shaming pharmaceutical companies into lowering prices, the foundation looked instead to "reorganize public goods markets." Leveraging former President Bill Clinton's connections, the foundation pooled commitments from small governments in the Caribbean and Africa, bringing together enough demand to make sales profitable for pharmaceutical companies. While not every family has Clinton's connections, the model still applies. Families have connections, leverage and creativity they can use for greater impact in the areas they fund.

Families of all shapes and sizes have the capacity to change the landscape around them, whether that landscape is sub-Saharan Africa or their own backyard. What excites and inspires a donor can excite and inspire a family and a community for generations. Explore Ylvisaker's functions and ask how else you might benefit the communities you care about.

For more information, visit the National Center for Family Philanthropy at www.ncfp.org.