The Advisor As Peacemaker
November 8, 2011
Financial advisors are often called upon to act as peacemaker, especially if their clients include family foundations, which often cause a variety of internal family conflicts.
As objective and trusted confidantes, advisors can play a valuable role in avoiding or resolving such problems. Understandably, advisors may be reluctant to get involved in family disputes, thinking, "It's not what they hired me for," "It's not my area of expertise," "I can't risk getting involved and alienating one of my clients," or even "They could sure use family therapy." However, there are simple and effective strategies advisors can employ to help ensure that their family foundation clients get through their rough patches. These strategies also give advisors an opportunity to strengthen relationships with clients and next-generation family members.
A Double Edge
Family philanthropy can strengthen and enhance family ties, offering family members a unique opportunity to identify, articulate and express family values and get to know each other on a totally different level.
But the deep emotional connections that are the strengths of family foundations can also be their weaknesses. Family foundations can magnify family tensions and undermine family unity. The process of making charitable gifts can quickly devolve from a unifying familial activity to a battleground for disputes that have been simmering for years. Differences between the sexes, siblings, family branches and generations and disputes based in personality, wealth, geography, communication, learning styles, lifestyles, ideology and religion can severely damage or halt the good work of the foundation.
If advisors address potential conflicts early, though, when clients are forming their family philanthropies, they can reduce the likelihood of a flareup. What follows are some of the devices advisors can use to help family members acknowledge and address issues that could impact the work of the foundation.
Legacy Statements: Many families struggle to interpret the founder's voice and legacy for their philanthropic endeavors. When there is no record of the founder's history, values, hopes and dreams, successive generations are forced to fill in the blanks. Fights can break out over interpretations of what grandpa would have wanted.
Advisors should encourage donors to record or document their intentions for the foundation and the way they wish succeeding generations of trustees to perpetuate their legacy. This gives future generations a point of reference and can resolve any doubts about how to allocate funds or focus the direction of the foundation.
However, a word of caution: When crafting legacy statements, donors should be aware that family friction can result when a founder unilaterally determines the purpose of the foundation or provides overly prescriptive direction. When trustees are forced to implement a vision that they can't buy into, engagement in the work wanes and tensions over participation may occur. Foundations need the freedom to adapt to shifts in the family construct and external realities.
Shared Mission: Urging families to develop a shared mission can address a number of struggles in a family foundation, particularly around engagement and decision-making.
Family members may feel marginalized or disengaged and may even create a situation in which they try to undermine the work if they don't buy into an overarching strategy. Family members are motivated by a clear statement of purpose that reflects a collective vision.
If families don't have an agreed upon shared mission, grant decisions can become personal. One sibling may whine, "As usual, Jenny's recommendations always get funded and mine never do!" A shared mission provides an objective guideline for making decisions, giving families impersonal criteria on which to base their conclusions. If the process feels fair, family members will remain inspired and partake in the foundation's activities.
Even with a shared mission, conflicts can still arise, particularly when individual goals conflict with those of the overall foundation. One way to mitigate this possibility is through discretionary funding, where trustees are given foundation resources for their own philanthropic interests.
Formal Governance Systems: Much like a family business, a family foundation requires a structure that acknowledges and allows for differences across generations, across different branches of the family and across geographic boundaries.
Foundations require work. They require family members to devote time away from jobs and families to attend board meetings, read documents and engage in phone calls. Conflict can arise when family members aren't "doing their fair share." If a board member doesn't show up to meetings or do the necessary preparation, family dynamics will be impacted.
Unfortunately, many families dive into foundation work without taking the time to create a framework for effectively working together. Despite their good intentions, families find themselves mired in bad feeling over such things as how meetings are conducted, how grant decisions are made, who doesn't do the work, who wasn't invited and how so-and-so dominates the conversation.
Families need to implement policies related to the attendance and quality of board meetings; the roles and expectations for board members; eligibility and participation; decision-making processes; administrative issues; and effective communication.
The more formal the governance system, the less likely divisive family interactions will infect the official business of the foundation. Having policies in pl ace that apply to all situations enables families to avoid making decisions on a case-by-case basis, which can hurt feelings.
For example, Jason, the son of a foundation founder, has his wife participating on the board. However, Susan, the daughter of the founder, finds that her spouse has not been allowed to participate. How do you think Susan and her spouse (and children) feel? Better to have a general policy about spousal participation that applies to everyone.
Communication And Group Processes: How families communicate with one another can directly affect the success of a family foundation and its ability to realize its mission. Some sort of communication breakdown almost always accompanies conflict. Unfortunately, families too often jump into making decisions without taking the time to create a functional group process-norms for how they communicate with each other, the roles they play in board dynamics, meeting ground rules and how they handle conflicts.
If it is clear that there are issues arising from how family members talk to one another and interact around foundation business, then advisors might consider bringing in a consultant to help clients build better communication and conflict resolution skills, develop norms for meetings and better understand their unique family dynamics. When families go through a shared experience that focuses on their group process, they are left with a common language and skills that they can refer to moving forward.
But over-relying on consensus can also pose a problem. If family members spend hours trying to reach consensus on relatively minor decisions, they might leave other agenda items unresolved, which can be equally as frustrating.
Even with guidelines, frameworks and group process agreements, conflicts still occur and advisors may hear about them. Advisors can help shift the negative dynamic by encouraging clients to address the situation rather than ignore it. Families often go to great lengths to avoid conflict. In fact, the National Center for Family Philanthropy has found that preoccupation with family harmony at any cost is the single most dangerous problem with these organizations.
Advisors should remind clients that disagreements are normal. While they may seem difficult and insurmountable, they can be great opportunities for learning and improving relationships.
It is important that advisors not take sides. Instead, advisors should focus on conflict resolution: engage in active listening and ask open-ended questions that encourage clients to put things into perspective. Advisors can offer to host a meeting for the family. Putting clients in a neutral environment, in the presence of an outsider, can sometimes encourage them to communicate. But advisors should not try to solve the family conflicts. Families need to arrive at their own solutions for them to be meaningful.
Another option is to recommend a professional with the suitable expertise to address the family's situation. A trusted team of professionals, in various disciplines, can be a valuable asset that advisors can offer clients. Consultants not only put out fires, but also help families sort out feelings and think through critical issues. They can help families choose or revise mission statements, settle on board composition, develop a grant-making process, figure out a succession plan, train board members, decide on nominating procedures and organize board retreats. These services can be particularly valuable during transitions that can spark conflict-for example, when clients are just getting a foundation established or after the death of a donor.
The strategies explored in this article can't heal old wounds-sometimes a family therapist is needed. But they can make an enormous difference in preventing and transforming conflict within family foundations.
If an advisor is called upon to be a peacemaker, it is because he or she is trusted and respected. Successfully helping clients navigate difficult family dynamics can enhance the client relationship, build deeper ties with the next generation and open new lines of communication that can be invaluable to all parties involved.
Mollie Bunis is a philanthropic advisor with Strategic Philanthropy Ltd., a philanthropic advisory practice based in Chicago serving clients worldwide.