How family foundations can reimagine their impact

The story of the Hyatt Family Foundation, recently profiled in The Globe and Mail, will probably strike a chord with many Canadian foundations:

“We worked very hard for that money, so we want it to go to a good place,” says Michael Hyatt, whose first family company, Dyadem International Ltd., was sold to IHS Inc. for almost $100 million. The brothers recently sold their second company, BlueCat Networks Inc., to U.S. private equity giant Madison Dearborn Partners LLC for a reported $400-million.

The duo is now looking at how to earmark some of the proceeds from the BlueCat sale to charity, which Mr. Hyatt says isn’t as easy as it sounds. “Giving away money sounds romantic and great, but it’s hard to do,” says Mr. Hyatt.

Having a family foundation also means agreeing on where to give. “We have to decide as a group, which isn’t easy,” he says. “It’s all important. It comes down to the passion and what matters to you and your family.”

In this post, we’ll consider three reasons why it’s hard for foundations to plan for impact and suggest an approach to reimagine the impact you want your foundation to have.

Strategy or structure?

Let’s compare how foundations and corporations get started. The founders of most corporations have a focus for what they want to achieve, then they start a business. For example, Bill Gates probably didn’t set up a corporate structure and then decide whether to enter the software business or some other business altogether. Like many founders, he tinkered, tested and tried out ideas, only setting up a corporate structure when it became necessary to hire more people or raise more capital. Arguably, this is not how many foundations get started. How many founders, before they even established a foundation, knew that they wanted to contribute to a cleaner environment, improve education for Indigenous communities or reduce the impact of income inequality? If this focus is not clear before the foundation is established, it does not become any easier to find over time.

Purposeful or personal?

Foundations, particularly small and medium family foundations, often have a personal and discretionary approach to supporting causes. After a successful career in business, which can involve difficult relationships and tough decisions, philanthropy is sometimes felt to be a relief from hard-headed calculation and a way of showing compassion. In not wanting to be too business-like, some founders miss out on the planning they would have insisted on in a business setting. How many founders have a statement of family values to guide their philanthropy? How many have a focus for the programs the foundation will support? How many have an impact statement that describes how the money they give out will achieve an impact in their communities? How many have a theory of change or framework to explain how the programs they support will achieve the desired impact? Finally, how many have discussed this at length with their board, asked what could go wrong, committed to a written plan of action and actually used the plan to make key decisions and oversee progress? I would imagine if we had a room of philanthropists who were raising their hands to answer these questions, we would gradually have fewer and fewer hands in the air.

Priorities or responses?

Even if foundations have priorities, there will always be opportunities to go in different directions. Applications from grant-seekers, requests from contacts and the priorities of stakeholders can take on a life of their own, especially when combined with the ongoing legal requirement to disburse funds. After reading The Philanthropic Mind: Surprising Discoveries from Canada’s Top Philanthropists (2015), I was struck by how often foundation boards would support a cause because they knew the people involved or would donate to an institution because of a previous family connection. From a social impact perspective, these are not necessarily the best reasons to support a cause. How many single mothers are personally known to the board members of a foundation? Recent immigrants? Members of Indigenous communities? In placing emphasis on personal connections and familiarity, foundations can miss opportunities to help those who are not well placed to ask. By having priorities that are carefully considered and clearly stated, foundations can set their focus to contribute their support where it is most needed, rather than where it is most requested.

Reimagine your impact

We challenge foundations to reimagine their impact. This is useful for all foundations but especially for foundations that have been established for several decades or where leadership has passed to new directors. How do we reimagine our impact? We use a three-part approach called Discern, Invest and Govern & Lead:

Discern: Reignite your passion to lead and make a difference. Develop a statement of family values that reminds you why the foundation exists. Put together a shortlist of causes that best support these values, regardless of what you are currently funding. Create an impact statement that shows how you will make a difference and how you will know you’re succeeding.

Invest: Once you have clarity on why you’re investing, the nuts and bolts of investing fall into place. You will naturally be drawn to investment programs that are sound and simple, to help you follow a plan; that reduce cost, to enable you to give more to others; and that reduce risk, to enable you to provide consistent support to causes over time.

Govern & Lead: Now that you’ve rediscovered your purpose and developed a sound process, you will naturally want to make sure you understand and own the investment process; build capacity for the next generation of leaders within your foundation; and build the capacity of others to learn from your success.

While this might sound clear enough, it’s certainly not easy. It involves reflection, discussion and, perhaps most difficult of all, firmness of resolution to translate good deeds into good outcomes. We encourage more and more family foundations to reimagine the importance of their grant-making to the communities and causes they serve.