CASE STUDY:
A successful family business is sold and provides a major cash infusion to the family’s foundation
ISSUE:
How does the family ramp up operations to handle the increased responsibilities of a suddenly much larger foundation?
PROJECT DESCRIPTION:
Until recently, Mom and Dad used their family foundation for their personal giving, which was roughly $250,000 a year. They met with their accountant a few times a year and directed the accountant to mail checks to their favorite charities. Now, because their business has been sold, the foundation has assets of $50 million — which requires annual grants of $2.5 million. The old ways of doing things couldn’t be easily expanded to handle this significant increase in grantmaking, and the family didn’t know how to proceed. “We need structure” explained one of the family members who serves on the foundation’s board of directors.
The foundation needed professional support and didn’t know where to find it. It had several options. First, it could hire its own staff, although given its size this might only be a part-time person. The family business had been sold; otherwise, perhaps the foundation could be run there. Another option was that the foundation could utilize the services of a bank, law firm, or accountancy firm, some of which provide foundation management services. In the end, the foundation chose to outsource the management of its operations to our firm.
Because some of the board members had no philanthropy experience, the family asked us to establish basic governance policies and procedures. Working with the board, we:
- Clarified the role of directors and their legal responsibilities
- Adopted conflict of interest and confidentiality polices
- Created a website and email address for the foundation, and
- Published application guidelines.
With that in place, the board requested help in making grants that were more impactful. Although the founders were still involved, and there was a basic mission statement in place, there was still a lack of clarity regarding what the foundation hoped to achieve. As a result, we worked with the board to clarify their interests. The mission statement stressed the foundation’s interest in both Jewish traditions and the environment. Of course, these subject areas are rather broad, so we worked with the board to better understand what they wished to support and what they wanted to accomplish. Through this process, we were able to clarify their interests. For example, we learned that they had an interest in Jewish summer camps.
Once the foundation’s interests were clarified, we sought out new applicants that fit its mission statement. In this process, we:
- Met with potential applicants and conducted site visits
- Conducted due diligence and an analysis of each applicant and proposed project, and
- Wrote detailed assessments of each application for board consideration and action.
As applications began to flow, we established a regular schedule of board meetings where the members could review each application and determine the appropriate disposition. Once the board made its decisions, we then would:
- Notify each grantee and those applicants that were declined
- Prepare grant award letters and contracts for the president’s signature
- Arrange for grant payments according to the schedule approved by the board, and
- Monitor the grants to ensure that the projects are proceeding as expected. In addition, we work with grantees to adjust the grants when unexpected events require changes.
After six months, the foundation emerged as an organized philanthropic enterprise with systems and procedures that achieve the interests of the family while incorporating all the best practices of modern foundation management.
RESULT:
By outsourcing operations to our firm, the foundation immediately had a highly experienced and professional staff capable of managing all its operations.