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The Future of Family Philanthropy

Posted: 9/15/2022

Click here to read on Stanford Social Innovation Review.

By Nick Tedesco & Michael Moody

We are living in a new gilded age. As close observers of the world of family giving, we are convinced this is an historic moment for families and the future of philanthropy as well. Momentous forces are sweeping across the philanthropic landscape. Astonishing wealth creation and rapidly worsening inequality. Re-energized movements to fight persistent systemic injustice. Intense scrutiny of big giving. Globalization.

What makes this moment perhaps the most notable time in the history of family philanthropy is that it is a time of crucial choices—with huge potential consequences and opportunities. Change is possible, but first, we must grapple with some hard questions our field has traditionally left unanswered. If families reflect deeply in this moment on their philanthropic purpose, pace, power, and practices, and carefully choose their future path in this rapidly changing world, they will not only expand their impact but can fundamentally change the norms of our entire sector and help catalyze broader social transformation.

Who and what do we mean by family philanthropy? Family philanthropy is, at its core, the act of a collective—rooted in the values of a family, carrying forward its name and legacy, and engaging its members. As a sector, we embrace and value family philanthropy as both a vehicle for bringing families together and a responsibility to our communities. A family philanthropic enterprise can be two people or 200, one generation or 10; it can be exclusively directed by family or incorporate independent and community voices. If you give with your family or a family, whether through a donor-advised fund, a foundation, a giving circle, or anything in between, you are connected to family philanthropy. That means this historic moment is your moment.

New Challenges in a New Gilded Age

Even before the pandemic, before the racial and social justice uprisings of the past few years, the world in which family philanthropy operated was transforming rapidly and dramatically.

A cavernous wealth gap—already vast—has been widening considerably each year. And this wealth concentration at the top is being passed down within families through an unprecedented (and now well-documented) wealth transfer across generations. The family philanthropy landscape today is one in which power is even more concentrated than in the past, and in which that power is even more subject to overt skepticism and critical appraisal. Donor families still operate with considerable autonomy, to be sure, but the voices calling for greater accountability are getting louder and carrying more influence.

At the same time, the problems that desperately need assistance from donors are getting worse, and seemingly more intractable. Rising social and economic inequality is a deep structural puzzle, not easily addressed by simple redistributions of current resources or well-meaning efforts to boost the opportunity for personal uplift. Achieving social and racial justice requires a fight against systemic barriers and implicit biases, not just individual behavioral shifts. An increasingly global society means increasingly global problems and the need for globally coordinated solutions—often ones that belie the sort of easy-to-track impact measures and stories that donors enjoy in their local giving. It doesn't help that the rising complexity of already wicked problems, added to intensified scrutiny, has made it easier for families to succumb to fatigue and frustration.

Thankfully, it is not just external forces pulling family philanthropy into this historic moment. Many families are pushing transformative changes as well—making bold moves, taking new risks, and challenging the status quo. We have the chance to name and debate the big questions facing us, and to draw lessons from those already pushing the edges. In this essay, we frame some of the difficult but essential questions family philanthropy must now address, with instructive examples of families already leading the way. Giving families are powerful levers for social improvement and an indispensable part of the philanthropy ecosystem. Families need to—and can—step up to this challenge. Many already are. Others are uncertain how to do so. We hope the ideas and examples below provide guidance and inspiration.

Families Are Giving More Than Ever

In practical terms, more families are now making larger, more long-term, and more flexible gifts. They are re-examining long-held beliefs about minimum distributions, increasing their payout rates, and reconsidering the perpetual lifespan of their giving efforts. Many donors are also dedicating more types of capital to purpose-driven pursuits, and using a wider array of vehicles and investments.

The General Service Foundation (GSF)—a family foundation based in Northern California who uses all of its resources to build a more just and sustainable world—is one such funder who recently chose to revisit the purpose of their philanthropic capital and accelerate the pace of their giving. In 2016, Executive Director Dimple Abichandani approached GSF's board of directors for a one-time increase in funding to bolster grantees after the election. In doing so, she began to consider why the foundation's spending policy wasn't built with any way to accommodate external circumstances and changing needs of their grantees. Over the following years, GSF leadership shifted their spending policy from a purely formulaic model to one informed not only by their perpetuity and investment goals but by their foundation's mission and the current circumstances. In May of 2020, the policy guided the foundation to increase their payout to 10 percent for four years to address the deep racial, gender, and economic inequities that were illuminated and exacerbated by COVID-19.

In the early days of the pandemic, the Mary Reynolds Babcock Foundation, whose mission is to help people and places move out of poverty and achieve greater social and economic justice, recognized the devastation COVID-19 would bring to their grantee communities. In response, the Winston-Salem-based foundation almost doubled their grantmaking budget in 2020, providing an additional year of funding to the majority of their grantees with no proposal required.

These two foundations exemplify not just expanded giving but a move away from default positions and toward more purpose-driven, problem-focused philanthropy. The question now is, will this momentum continue? And how many families will choose to be bolder, to activate more of their resources with intention?

This leads us to the first set of essential yet difficult questions that family philanthropy must confront—both as a field and within individual families:

  • As capital continues to grow, how might we use the increase in resources for greater social impact? What does the world need from expanded giving efforts?
  • What are the barriers that prevent us from giving even bigger and more intentionally? And what can we do to overcome them?
  • How and when are the traditional norms and usual practices of family giving standing in the way of moving more money for real progress on the most pressing issues?

Trying New Approaches, Taking New Risks

Beyond revisiting purpose and pace, many families are very intentionally stepping outside the lines of conventional philanthropic strategies and well-worn practices—such as using a private foundation structure to make program grants to established nonprofits—in order to innovate and experiment. We see this in the invention and precipitous growth of new and varied giving and investing vehicles, from donor-advised funds to charitable LLCs. Families are increasingly taking a portfolio approach that combines traditional grantmaking with values-aligned investing, advocacy strategies and political giving, social entrepreneurship, and more. And there is growing interest in new collaborations and partnerships to scale impact, both between funders and grantees and among donors of different types.

This rising propensity for innovation and tolerance for risk stems from critical reflections among donor families, who are examining their own accountability for perpetuating inequities and recognizing that the usual philanthropic investments have often not made a significant dent. Some families are resolving to overcome their usual risk aversion to lean into the opportunity to experiment, even if doing so means not meeting conventional definitions of success.

For instance, the Overdeck Family Foundation, a New York City-based philanthropy that focuses on education, in 2021 announced significant changes to their funding model after reflecting on grantee feedback, particularly in the wake of COVID-19. Overdeck shifted from a traditional model to one that prioritizes relationships: increased transparency in terms of grant expectations and timelines, personalized support beyond funding dollars, streamlined reporting requirements for multi-year grants, and more significant general operating support after pilot grants. Overdeck also decided to provide support for early-stage organizations that they may not have funded previously. The strategy intentionally built-in space for innovation, evidence-building, and growth for their grantee partners, with the hope that this support would accelerate new, effective solutions toward their mission.

Similarly, the Patrick J. McGovern Foundation—a foundation dedicated to advancing artificial intelligence (AI) and data science solutions to create a thriving, equitable, and sustainable future for all—embraces innovation and a risk-taking approach through their focus on data and AI solutions for social impact. The McGovern Foundation recently merged with the Cloudera Foundation—an exercise of risk-taking and collaboration all in itself—to form the Data and Society program, with the goal of building data science and AI capabilities within nonprofit organizations. This program will help nonprofit partners be more effective agents of change, and provides the necessary risk capital to experiment, innovate, and learn through these new approaches.

Will more and more families acknowledge the opportunity to be nimble and try new things in the hopes of deeper impact? Will we as a field increasingly include taking risks into our definition of good stewardship?

Family philanthropy must reflect on some complex questions around these moves toward innovation and risk-taking:

  • How can we overcome fear of risk and criticism and try new approaches and ideas? How can we embrace being uncomfortable in ways that can lead to growth and change?
  • How do we assess the progress of innovation and experimentation, and who is best positioned to do so?
  • What happens to traditional philanthropy in an evolving, diversifying world? What role might it continue to play amongst all the other new approaches?

Reimagining Partnerships and Power

More and more philanthropic families are also beginning to embrace a dialogue around their power and privilege—a dialogue fueled as well by the amplified critiques of the field that no one can (or should) now ignore. Donors are asking crucial questions about their role and responsibility as wealth holders in an unequal world, and—in the same spirit of trying new things noted earlier in the essay—looking for better ways to reinvest that wealth, ways that move toward more trusted partnerships and more shared power.

We see this in the rise of the trust-based philanthropy model, of participatory grantmaking, of community-based philanthropy, and others. A number of philanthropies are embracing practices like: reimagining their governance model through including community board members, practicing more intentional listening and incorporating feedback into their strategies, partnering with staff who have lived experience, and adopting greater transparency with grantees and the public. Some families are shifting decision-making power with community-based grantmaking models, while others are seeking partnerships or joining grantee-funder collaboratives to scale impact.

Two great examples of foundations who are confronting power and reimagining partnerships are the Kataly Foundation and Chicago Beyond. The Kataly Foundation's mission prioritizes BIPOC-led strategies that serve those same communities and intentionally focuses on building power within communities of color. Their approach to grantmaking and strategy is very community-based. For example, the Environmental Justice Resourcing Collective is a Kataly program led by a decision-making group of nine leaders—all with direct experience in the environmental justice space—who make grant decisions, but also decisions around strategy and the overall body of work in the initiative.

Similarly, Chicago Beyond leads with a "Whole Philanthropy" approach to funding that elevates a "with, not for" mentality and centers justice. Whole Philanthropy does away "with the false dichotomy of 'us and them'…it requires interacting with our partners, not in a paternalistic way, but as equals." This approach represents a huge shift in mindset for the philanthropic community at large—reorienting philanthropy to be about the value of the human beings involved in this work, and focusing on sharing power and building relationships that move us forward in a more equitable and just manner.

The narrative on wealth is changing, and with it, giving families are too. Will more families take steps to share power and build trust? Will this move the needle in the field despite the continued structural forces pushing in the opposite direction, toward ever-increasing wealth and concentrated power?

The field and individual families have to reflect on:

  • How does your family wield power—even unintentionally—now, and what would a shift toward sharing power look like for you?
  • What can we do to improve our partnerships, rather than relying only on changes by our less-powerful partners? What is required of us?
  • What might stand in the way of more equitable philanthropic relationships? Again, how can families embrace being uncomfortable in a way that leads to improvement and growth?

Changing the Guard

Generational transitions are not a new phenomenon in family giving. And often, they are as much an inevitable consequence of the passing of time as an intentional effort to push change. But the current changing of the guard is different. The current transition is less about changing who sits in the same old seats at the family philanthropy table and more about changing what it means to sit at such a table at all.

The "next generation" in family philanthropy includes more than just the children and grandchildren coming up into new roles in multi-generational giving families. It also includes new donors who are making their own wealth and embarking on their own giving journeys. And it includes a new group of professionals working in family philanthropy in various capacities, from staff to advisors and others. All of these emerging leaders are impatient to disrupt the field to an extent that previous generations didn't seem to be.

For one thing, the new generation is more diverse than any previous cohort. It includes more emerging donors of color, more professionals with varied lived experiences, and more gender balance in family decision-making. And this diversity is reflected in their attention to funding BIPOC- and women-led organizations, and supporting more inclusive philanthropic decision processes.

The next generation in family philanthropy is also the one pushing hardest for the sort of new experiments and improved relationships discussed in the previous sections. They are more willing to take risks, more interested in talking about power dynamics, and less tethered to traditional norms and practices.

Sobrato Philanthropies—a multigenerational organization that engages in grantmaking, advocacy, impact investing, and collaborative efforts to create impact in Silicon Valley and around the world—is one such example. In the previous decades, the foundation's second generation, in particular Lisa Sobrato Sonsini, was critical in professionalizing the family's giving. Now, the third generation's voices are shifting their philanthropy. According to a recent Inside Philanthropy profile, the new generation has been instrumental in expanding the foundation's reach beyond the Bay Area to address complex global issues like climate change. John M. Sobrato notes, "It was really the third generation, but certainly, the second generation, too, that felt we should broaden our aperture and look beyond Silicon Valley… at some of the broader, more systemic problems—and take more of a strategic approach."

The David Rockefeller Fund's fifth generation also forged its own path, learning from and with the older generations. Board Chair Camilla Rockefeller, a member of the fifth generation, said, "In small but significant ways, we're moving from a more traditional top-down philanthropic model to one where the grantmaking is increasingly defined by collaboration and relationship building with grantees." Many of those changes are embodied in the Fund's guiding principles, which the fifth generation helped to craft. For instance, the Fund's principle of respect includes considering grantee partners to be equal partners in the work and a commitment to support them in ways that the grantees find most meaningful.

As members of the next generation come into their roles as the leaders of family philanthropy—roles they will fill for decades to come—their eagerness for change and willingness to rock the boat will surely cause much hand-wringing and friction in our field. Will families welcome, or even embrace this disruption? Will new donors and new professionals pay heed to established norms and work alongside previous generations who want to stay active?

To help with this inevitable changing of the guard, we need to consider some pressing questions:

  • How can we as a field empower the next generation of leaders and help them be successful? What support do they need?
  • How can families adjust to multi-generational leadership and governance, especially in families with a strong sense of original donor intent? What will be the sources of tension and disagreement, and what can families do to work through these?
  • How can families harness the energy and eagerness of new donors, while acknowledging the experience and commitment of those who came before them? How can they make sure "disruption" works to increase the impact of family giving rather than subtract from it?

Where Do We Go From Here?

Family philanthropy needs to decide what it will be moving forward in this historic moment. The field needs to tackle the many difficult questions raised here with humility, openness, and conviction—to respond reflectively, not defensively, to this moment of heightened scrutiny and opportunity. We need to identify those families blazing new paths and grappling with often uncomfortable topics—and help others do the same.

Where and how can we do this collective reflection and modeling? How can we invite in more families—even ones skeptical of, or resistant to change? And how can we expand the dialogue to include our partners, and even our critics? This is the challenge that family philanthropy faces in what we believe is the most catalytic moment ever for the field.

The payoffs for engaging together in this way promise to be more effective and more ethical giving, a clearer sense of shared purpose, and greater impact than ever before. The penalties for ignoring the challenge will be less impact, more discouraged donors and frustrated partners, and a decline in family giving overall. It will likely mean changes imposed on the field, rather than led by the field.

In the end, what will make this moment truly historic is how we respond and take the field in the best direction; and if we aren't careful and thoughtful it could call into question the very purpose of the entire enterprise.

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