Challenges in Succession Planning

As family members come together in their collective role as trustees of the family foundation, they must grapple with many issues. Along with their grantmaking responsibilities, they set policies for governance and management and oversee the investment of the foundation’s assets. Unlike officers of other types of foundations, trustees make decisions that affect both the organization and the family. That awareness often complicates and confuses issues as trustees struggle with the question of whether loyalty is owed first to the family or to the foundation. Perhaps in no other area does that choice loom larger than in succession planning.

Preparing the next generation for leadership is the most crucial challenge facing family foundations created in perpetuity. It requires long-range planning, beginning when children are young and continuing into early adulthood. Later in this chapter, we will encounter examples of families who recognize succession planning as a long-term process. They give their young children an annual “personal-giving allowance” so that they can donate money to charities of their choice, and they also often encourage their children to work as community volunteers. Many parents begin initiating their children in grantmaking when they are in their teens – discussing grants over dinner and inviting the children to observe foundation board meetings. More formally, some create adjunct or junior boards to give the children hands-on experience in evaluating grants, making site visits and learning to work together as a team. These parents not only participate in their children’s education but also are making room for them at the table when they become eligible for board membership.

Unfortunately, in many foundations, succession planning never gets off the ground. Either the older generation does not bring it up, or the issue is raised but left on the back burner until "the next time." Why would older family members entrusted with the future of the foundation neglect so vital an issue? One possible explanation is the lack of clear boundaries between the needs of the family and the needs of the foundation.

Family business consultant Ivan Lansberg has coined the term "succession conspiracy" to describe a situation in which the head of the family firm and his or her family consciously or unconsciously conspire to avoid succession planning. For both parents and children, the elder family member's mortality is often too distressing to contemplate. Instead, older and younger generations collude in sustaining the illusion that family elders will live forever. The result is that the older generation avoids facing up to its own mortality, and the younger generation avoids thinking about losing much-loved family members.

Similar situations occur in family foundations. A foundation policy to appoint board members for lifetime service can foster the "succession conspiracy," especially in foundations that have a fixed number of board seats. Without a deadline for transfer of power, trustees appointed for life may feel no pressure to train the next generation. That puts younger generation members in a difficult spot. If they ask to serve on the board, the older generation may suspect that the younger

family members want to get rid of them. If they say nothing, they are in the unenviable position of waiting for the older family members to die - hardly a desirable circumstance under which to join the board or enhance family harmony.

Trustees may also put off succession planning in order to avoid hard decisions about such issues as fairness and purpose, or who's in and who's out. How do they decide on such thorny questions as whether stepchildren are family, or whether and how to keep a difficult or incompetent family member off the board? Is the family brave enough to buck family tradition or challenge the family system for the good of the foundation? Answering these and similar questions requires careful thought and deep soul-searching.

Touching as it does on so many potentially controversial issues, succession planning is tempting to ignore. To minimize that possibility, some foundation set aside time apart from regular board meetings for self-study – that is, a systematic exploration of issues related to succession, undertaken either with or without the assistance of a professional facilitator. When approached thoughtfully, the self-study process yields valuable results: family trustees are better able to distinguish family issues from foundation issues and better prepared to write clear policies. Of course, family issues can never be completely separated from foundation issues, but well-thought-out policies can draw firmer boundaries between the two.

How families answer the questions of succession planning is inevitably influenced by factors such as family culture, family systems, stage-of-life issues, and personality types.