I quite frequently get the question: “Should I create a foundation?” And whenever I do, I tell the person asking the question that by asking this question, we are already talking at the wrong level.
Needless to say, they are usually surprised by my response; after all, it seems I am avoiding answering a question repeatedly asked (and answered) by many throughout the years. After I walk them through the rationale for my response however, they always understand.
Essentially, the question emphasizes philanthropic giving fitting into a vehicle instead of the other way around, allows form to lead substance, and presumes a one vehicle solution solely because the individual has funds to give. This limited approach ultimately decreases flexibility and nimbleness, which are the cornerstones of any effective, impactful philanthropy.
Outdated conversations about structuring philanthropy often start with name calling – foundation, donor advised fund, public charity, and so on. These conversations started and still start by tossing these names at the philanthropist, explaining each in turn, and seeing which option fits the philanthropist best, based on a general description of the philanthropist’s vision or the amount of funding the philanthropist has to expend for giving.
Given the diversity of modern philanthropy, the better question is: What should my social impact ecosystem look like?
Having served as an advisor for two of the world’s largest philanthropies, I have spent a significant amount of time thinking about how to answer this question and best structure philanthropic visions, dreams, and ambitions.
I always suggest individuals and families start with their philanthropic vision, and their immediate and longer term goals for their philanthropy. From there, I frame the conversation to be about creating ecosystems instead of creating specific vehicles and entities.
These ecosystems essentially house the philanthropist’s goals and include a variety of for-profit and nonprofit vehicles, structures, and entities, sometimes in different regions of the world, that advance that vision. So, the conversation is not a static one about the names of the vehicles, and is much more dynamic and focused on the multifaceted ecosystem that will accomplish the philanthropist’s vision.
Accordingly, I suggest six questions individuals and families thinking about creating a social impact legacy should ask to help inform this ecosystem build out:
- What money do I have for philanthropy? Will the money come solely from you and your family or will funds also come from independent sources, governments, and charities? And what amount will be contributed? If you have $5,000, $50,000, or $5,000,000 that can be used for your philanthropy, that amount will dictate how much money you can spend on your philanthropic passions, the administrative upkeep of that passion, and how you structurally pursue that passion.
- How many people do I want to involve in my philanthropic decisions? Do you want decision making to be a family or group affair? Do you solely want to be responsible for the kinds of organizations and individuals that receive your funds? Do you want people checking in with your funding recipients to see how they have used the funding in their work? The amount of people you want or are comfortable involving in philanthropic decisions can help you determine the structure that can incorporate that level of engagement.
- Why and how do I want to change the world? Do you want to change policies? Do you want to disrupt the systems in which certain communities operate? Do you want to provide direct services? Do you want to engage in some combination of these activities? Do you want to fund organizations, movements, or community leaders? Determining how you want to have social impact will inform the backbone of your ecosystem and how the different entities within that ecosystem work together.
- Where do I want to operate from and in? In what country or countries do you want to operate? Is there a particular region in which you would like to have an impact? Do you want to work in conflict regions? Do you want to fund organizations in one region of the world and directly fund individuals in another? Determining where you want your operations and impact will ensure geographical considerations are included in the build out of your ecosystem.
- How do I want to handle transparency in my philanthropy? Do you want the public to know all about your contributions? Do you care about reporting your charitable activities to state and federal agencies? Are you fine with sharing your business plan, governance documents, and initial financial projections and organizational policies with anyone who requests them? Understanding the level of transparency you are comfortable providing for your giving and the other social impact work you do will inform the corporate and tax forms of vehicles within your ecosystem.
- How long do I want my philanthropy to be around? Do you want generations of your family participating in your vision of how to change the world? Do you want to be extremely nimble and flexible enough to change missions or shut down at any time? Knowing your longevity appetite will inform the contours of your ecosystem and how robust that system should be.
Ecosystems are how we should frame the conversation about creating social impact. The answers to ecosystem design questions ultimately inform the infrastructure design of a more nimble, flexible, effective philanthropy. And the more we think about how to build out these ecosystems to best accomplish philanthropic visions, the braver we can become in pursuing the type of change and impact we would like to see in the world.