Host: Welcome back to the Truist Nonprofit Insights Podcast Series! Today’s podcast will examine one of the most important issues for ensuring the long-term success of family foundations, namely the transition of foundation leadership from one generation to another. To lead our discussion, we are joined by Allen Mast, senior vice president, Foundations and Endowments Specialty Practice at Truist Bank. We are also very pleased to feature Virginia Esposito, senior fellow and founding president of the National Center of Family Philanthropy in Washington, D.C.
Allen Mast: Ginny, I've worked recently with two family foundations that are dealing with a transition in foundation leadership. One was quite sudden—the result of the unexpected death of the family patriarch. There was very little, if any, planning for this transition, and that's led to some challenges. In the second instance, I serve a family foundation that has identified an impending transition from one generation to another as a significant issue, and they're actively planning for how that is going to occur.
Now, my first question, Ginny, is given these two different situations, how important is it for a family foundation to involve the next generation in the foundation's work, communicate about its history and purpose, and to begin planning for the inevitable transition ahead of time?
Virginia Esposito: I am a big fan of families looking at the opportunities that bringing all the generations together can bring to them and to the success, effectiveness of their giving.
So a sense of what has grounded the foundation—why the foundation has been launched—is at the table, a sense of provocative questions about why things have been done the way they have, and access to better information, perhaps, about new technologies and new issues. Everything is at the table, and everyone enriches the other.
Mast: That can be hard to pull off, Ginny, especially given the often different experiences of the original family members and the next generation. What's been your experience with that?
Esposito: In groups of traditional philanthropists, I’m more likely to hear about very hard times, children or grandchildren of Depression-era families, major world wars—the Vietnam War—and sometimes that translates into a real interest in human and social services, a compassion for those in need. Now, when I talk to the next generation, there’s a sense that their civic engagement is likely to influence their interest in the environment or education. They’re born of very different experiences, so their giving may reflect those differences.
Mast: Given that, what are some of the challenges you've seen as a family foundation begins to move a generation or two beyond the donor?
Esposito: One of the complications is certainly the issue of succession in terms of leadership. Often in the first and second generation, everybody can be a participant, everybody can even be a leader. But as the family grows and changes, there’s going to be more members, people with more or less time to give to this, and so some really tough choices are going to have to be made. The patterns of the first and second may not work for the third and fourth.
Mast: Ginny, that would seem to suggest that discussing the issue of succession sooner rather than later, before it becomes urgent, is really important.
Esposito: I think that one of the benefits of speaking about succession planning before it’s urgent is the ability for a family to make choices based on their principles, based on what’s in the best interest of the philanthropy and family going forward. When you have to make decisions about succession planning, in crisis or in an emotional situation, you tend to make decisions based on personality.
And so first and second generation, for example, can really save the third a lot of anxiety if they do some of this thinking and planning early.
Mast: Well, given that, what strategies are effective in engaging children and preparing them for a life of service and a potential role in the work of the family foundation?
Esposito: The first thing I recommend is to engage children not as a part of the foundation, but as a part of their family life. I think the more this becomes an intrinsic value, something that the family believes in and wants to encourage, the more this becomes something that takes such a personal hold.
So volunteering as a family or encouraging the personal interests of young people, encouraging them in their own giving and volunteering so that when they ultimately, hopefully, one day, come to the foundation table, they come prepared to bring all this richness and experience.
Mast: Ginny, how do families balance engaging the next generation and transitioning leadership to them while at the same time striving to stay true to the original purpose of the foundation?
Esposito: I am a deep believer in having the family articulate its set of values. Program interests may change, values can transcend generations. I think it’s really valuable to have a conversation about vision: what is the good or the change you want to see in the world—or at least the portion of the world as you’ve defined it—and how do you give those messages to future generations with a sense of possibilities.
Mast: Ginny, that can be a difficult task for any family to manage on its own. How can it be helpful for a family to engage a consultant or a professional to assist them in this effort?
Esposito: Some of the best consultants I’ve seen have worked with a lot of family giving programs. So not by way of inflicting a solution on someone, they can rather say, well, this family handled it this way, and this one handled it that way, and this is how one was successful, this is how one tripped up a bit. And so I think a good consultant can have, at his or her fingertips, just the kind of examples that can be both inspiring and instructional when needed.
Mast: Ginny, thanks so much for these really important insights.
Host: We hope that you enjoyed today’s podcast. Ginny Esposito lent some really important insights about family foundation succession and leadership transitions.
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