Tag Archives: philanthropy

Family Firms Triple Bottom Line

Joe Schmieder
Joe Schmieder

Lost in the commotion of last week’s Boston Marathon bombings on Monday, April 15, was the fact that many Americans, including family businesses, were scurrying about to sign off and send in their final tax forms for the 2012 tax year.  The season for “harried bean counters” has come to an end, or at least to a well-deserved break!  For weeks family firms, taxpayers and their supporting financial people have been buried in their offices, factories and homes adding up what we earned, spent, gained, lost and perhaps misplaced.   One thing that these tax people do very well is provide us with a quantitative tally of our financial position.  According to our family business clients, most family firms had another strong financial performance in 2012.  Yet for family businesses the financial results are not the only metric used to measure performance.  Many family firms think broader as some have developed the more encompassing concept of the triple bottom line: Economic, Environmental and Community.  Great family enterprises, while economically strong, are also stewards of the environment and often lead the development of eco-friendly products and practices.  These innovative efforts create jobs that support many families.  In addition, communities around the world benefit significantly from the philanthropy provided by these visionary family companies.  In the future the bean counters may find ways to also measure the long-term impact of these important contributions, which family firms make to society.


Growing up with downsizing

Albert Jan Thomassen
Albert Jan Thomassen

Do you sometimes think of the ‘good old days’ when you started in your family business with lots of business opportunities and a growing economy? As your children’s generation is starting their career in business life – things are very different…

In the US and Europe economies are suffering from recessions and limited growth. Many family businesses face mature markets, populations that are shrinking, and fierce competition from other continents. Companies are getting used to a constant flow of cost cutting and downsizing operations. But is that the nature of an entrepreneur?

Most family business owners I speak to say no to this question. They say entrepreneurship is about seeking opportunities, about adding new business activities, about strolling the market and getting ideas for new products or services.  Many young people tell me these are important entrepreneurial skills but their own family business may not be the right place to learn those skills.

So what to do about this and how to teach those important skills to the next generation? Here are a few examples gathered from family businesses in those suffering economies that want to stimulate the right entrepreneurial skills for their next generation. 

Start your own business
A fourth generation family business stimulates their next generation members to start their own business as one of the ways to gain outside experience. They value it equally to working in another company for a number of years before joining the family business. 

Explore a totally new market
Stimulated by their father, three brothers went to China to explore new market opportunities for their company. They hardly got support and had to find their way. Two brothers stayed in China and now have their own company. The third is now working in the family business and is leading new business activities.

Provide equity to next generation members
One family that has acted for a number of years as informal investors with their own private equity firm – decided to actively provide equity to next generation members who want to start a new business venture. Upon submission of a business plan the family investment committee assesses the proposal and provides equity. They acknowledge that it is a risk and you may also fail. But as long as you are willing to learn and expand you skills the family sees it as a long-term investment in the entrepreneurial culture of their family.

Become venture philanthropists
Another family who sold a substantial part of their family business decided to totally reorganize their charity activities. Instead of donating to projects they now invest in social ventures. But more importantly the next generation is actively involved in the selection and governance of those social ventures, thereby developing skills to seek opportunities and build new businesses.

Start a new business venture
An old time idea but maybe even more valid now is to give a next generation member that is working in the family business the task to open a new location, start a new business activity or start in a new market where the company wasn’t active before. This stimulates seeking opportunities and if successful it is maybe the best way to boost confidence and prepare for executive responsibility.

Business should be fun!  Downsizing usually is not, so business families should create other opportunities for their next generation to acquire the right entrepreneurial skills and confidence for their future and the future of the family business.

Do you have other great ideas or experiences for the next generation? Your reactions on this blog are most welcome.


The Changing Face of Philanthropy in Family Firms

Paul Hawkins of the University of Portland, recently said the following:

“When asked if I am pessimistic or optimistic about the future, my answer is always the same: If you look at the science about what is happening on earth and aren’t pessimistic, you don’t understand data. But if you meet the people who are working to restore the earth and the lives of the poor, and you aren’t optimistic, you haven’t got a pulse”.

In providing support for the communities in which they provide employment, manage supply chains and enjoy a customer base, family firms have demonstrated an extraordinary willingness to give back. Much of this is connected to their values which include the need to support the wider “societies” in which they operate.

However, increasingly, giving monies is insufficient for family firms. They want to get involved in the causes they support in a hands-on way. Some are beginning to treat their philanthropic support and donations as they would any other investment. Family firms are beginning to measure their ROI in emotional, spiritual, political, commercial and social terms.

A group in the UK called “Achieving Impact”, run by James Plunket, works with families to align their values to the political, social and environmental needs of those to whom they give. Families treat their investment in land/machinery/people in the same way they treat their investment into charities. They work to build KPIs that help them to measure the impact they are having. Performance measurement becomes a key element in the philanthropic endeavours of family firms. Some families ask:

  • are we collaborating with other providers (social and political) for the greater good?
  • to what extent are we proactive in our giving vs. reactive?
  • do we combine with institutional investors who are ethical?

 Are we seeing this trend elsewhere in the world?


Trends in Giving for Young Professionals

Stephanie Brun de Pontet
Stephanie Brun de Pontet

The ‘personal finance’ columnist at US News & World Report, Kimberly Palmer recently wrote a book titled: “Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back” (Ten Speed Press).  In this book she cites an impressive statistic from the Center for Philanthropy at Indiana University that on average, people under 40 donate about $1,200 a year.  While that is a healthy amount for the average person, ms. Palmer indicates that young adults are giving back differently.  In particular, she point out that a lot of young people today like to start their own charities.  This is in keeping with my recent post, that there is a trend towards wanting to be more hands-on and contribute time as well as money.   Families with strong entrepreneurial genes may enjoy the challenge that comes with setting up a charity for a cause in which a number of them share a passion.

If you are looking for something a little less labor-intensive, ms. Palmer also speaks about ‘Giving Circles’ that pool the funds of a group of friends who want to take the time to research charities and ensure their donations are being well used.  These are not too dissimilar to the investing clubs that were popular in the 1980s and 1990s (where people got together to research companies in which they wanted to invest in to make a profit).  This strikes me as a great model that families could emulate for next generation groups who are eager to give back in their communities, and also want to practice decision-making skills and learn how to differentiate between different uses of money (relevant when evaluating the merits of a for-profit or non-profit investment choice).  If your family is not ready to start their own circle, interested family members can find a giving circle (givingcircles.org is the website where these can be found) that already exists in their area, and join themselves to learn and hopefully bring the model back to the family for consideration.


Families in Business Embrace Philanthropy in Many Ways

Stephanie Brun de Pontet
Stephanie Brun de Pontet

There has been a lot of buzz in the press of late around the ‘Giving Pledge’ launched by Warren Buffett and Bill and Melinda Gates, as an effort to encourage billionaires around the world to donate the majority of their wealth to charity.  According to a recent article in Daily Finance (See full article at:http://www.dailyfinance.com/story/forty-billionaires-pledge-wealth-charity/19581080/?sms_ss=email&icid=sphere_copyright) over 40 well-known figures have signed up for this pledge, such as CNN founder Ted Turner, Ronald Perlman, designer Diane von Furstenberg, to name but a few.  Members are expected to make a public statement about their gift, explaining their decision.  Buffett describes the effort as follows:

“At its core, the Giving Pledge is about asking wealthy families to have important conversations about their wealth and how it will be used. We’re delighted that so many people are doing just that — and that so many have decided to not only take this pledge but also to commit to sums far greater than the 50% minimum level.”

While obviously the huge philanthropic commitment being pursued through this Giving Pledge is to be lauded, we know families that own businesses might not have the ability to make the commitment that is being encouraged on this platform, but remain among the most philanthropic and high-contributing members of society nonetheless.  The reality for a family that aspires to see its business vision carried into the next generation is that transitioning a capital-intensive business to the next generation while funding ‘Uncle Sam’s’ cut will tie up the resources of even the most generously-minded soul!

In an informal poll among our family business advisors I heard a number of comments around trends and approach to giving among our family business clients.  Chris Eckrich offered the following series of examples:

“The biggest trend I see with clients is getting actively involved in their giving.  Visiting Africa’s micro businesses, walking in fundraising walks to which they contribute, touring hospital wings that have been donated by the family, serving on boards for causes they feel strongly about, helping build buildings, and many site visits to recipients of grants are examples.

Those who seem to enjoy active involvement with today’s dollars…as opposed to future dollars at death, show great vibrancy in their foundations.”

Others mention the frequent family time devoted to service projects such as a building a ‘habitat for humanity’ home as a project undertaken by the ownership group.  These efforts of going beyond writing a check, and getting involved in person demonstrates a genuine connectedness that provides a strong example to the broad community, employees as well as to future generations of owners.

John Ward also underscores the importance of choosing to keep a family business private (rather than selling and creating cash that can then be given away).  Many closely-held businesses are run very ethically and provide value to their customers, and an excellent work opportunity for hundreds or even thousands of employees – staying the course in this case represents another important way of contributing to society.  These business-owning families are often deeply connected to their communities and also contribute tirelessly to local charities and community development (which is always enhanced by the presence of stable, well-paying jobs).

Finally, Jennifer Pendergast underscores the importance of a family having an intentional conversation about the purpose of their wealth.  Most families with whom we work have philanthropy and giving of funds as one of their shared purposes as a family – but many also choose to reinvest funds into new ventures, contributing to society through business innovations and employment. 

It would be great to share how different families have found meaningful ways to contribute – as community-minded families are eager to hear of new approaches to stimulate their own family’s thinking.  To quote John Ward: “different approaches for different people is the American way.”  Feel free to share your ideas or comments as we are always eager to learn about the many ways that families fulfill their ‘obligation’ to be generous and engaged members of the community.



While there are many things that I appreciate about working with families that own businesses together, one aspect that always takes my breath away is the depth of generosity that so many of these families demonstrate. While recently looking for examples of statements or philosophies around giving for a family that wanted to have a discussion of how they could make a powerful contribution, I came across a few good quotes that I share just for interest…

From Andrew Carnegie: “I resolved to stop accumulating and begin the infinitely more serious and difficult task of wise distribution.”

From Eli Broad: “To me, money is a means to do good. I reached a point in my life where I had enjoyed tremendous business success that afforded my family everything we could possibly want. My wife and I then decided that we could use our wealth to make a difference. So we created the Broad Foundations to do four things: to improve urban public education, to support innovative scientific and medical research, to foster art appreciation for audiences worldwide and to support civic initiatives in Los Angeles.”

From Carlos Slim Helu: “I’ve always said that the better off you are, the more responsibility you have for helping others. Just as I think it’s important to run companies well, with a close eye to the bottom line, I think you have to use your entrepreneurial experience to make corporate philanthropy effective.”

As always, we are eager to hear about how your family addresses its responsibilities around philanthropy and community service.


Governance : Why is it so hard to define?


Amy Schuman
Amy Schuman

This week I’ll be speaking to a group of family business owners in the Milwaukee area, and the topic they chose was “Governance”.  When they requested that topic, first I felt excitement – but it was soon followed by a bit of dread.

I felt excited because governance is such an essential component in family enterprise strength and continuity. I also felt dread because, even after years of helping families reap the benefits of governance structures like Family Councils and Boards of Directors, I still find it difficult to come up with a simple, clear definition of governance.

Like most people, my mind immediately seizes upon Boards of Directors as the prime example of governance. Indeed, a web search on the term ‘governance’ quickly yielded the following:

That relatively simple (!) definition may work for public companies, but, the complexities of family enterprise can require more of a multi-faceted approach to governance.

For example, as families become larger and more complex, they also appreciate the benefits of more formal family governance, most often in the form of a Family Council.

Families that pursue their own foundations and other philanthropic efforts come to appreciate the benefits of strong governance in the form of Foundation Boards.

As families move into the cousin stage – and beyond – they seek governance structures to serve their larger, more dispersed ownership group. Often called Ownership Councils, these bodies provide a structure for balanced participation and oversight on behalf of shareholders.

Families with Family Offices also find significant benefits from the oversight and expertise of an objective governance group of some kind.

Given all this complexity – what’s a good, simple definition of family business governance? To inspire you, I will go out on a limb and offer my own working definition – as follows:

  • Family enterprise governance provides an established set of systems and structures that ensure sound and fair actions and decisions, often by a small number of well-qualified people on behalf of a larger number of stakeholders.

I know this definition has plenty of room for improvement – what’s missing? What’s your current working definition of ‘family enterprise governance’  – and how does it help you get the results you seek?