Arabella Advisors: The Advantage of Thinking Inside the Box
By Diana Tyler
Many families begin their efforts to develop a focus for their philanthropic giving by identifying very broad giving areas such as the environment or education. Doing so is often a first step to finding common ground across generations and family branches. After all, they sometimes tell us, “we don’t want to box ourselves in.” Some families retain these broad areas, while others continue to evolve and narrow their focus. While we understand the challenges of zeroing in more tightly, it can actually amplify your philanthropy by allowing you to be more effective, to better see impact, and to feel more connected as grant makers.
Many have cited a connection between focused grant making and increased engagement, but for me, nothing beats first-hand observation. When a client calls and sounds as if she is jumping with excitement because of the progress made as a result of one of her grants, we see the true effect of building a box and staying inside of it. Real, systemic change takes time and dedication, and when you can point to your role in say, the improvement of your local elementary schools or a shift in environmental policy, the feeling is powerful and encourages you to do more. Targeted grant making also provides you with a better education about an issue or geography and makes it easier to identify successful nonprofits and projects for future grants.
So why don’t more family foundations select a narrow focus and stick to it? Here are some of the concerns we hear most often:
I’m worried that if we define our mission too tightly and then give to an organization that doesn’t address that focus, we’ll get in trouble with the IRS for giving outside our mission.
While the IRS has many rules for private foundations, requiring them to stay within their missions is not one of them. As long as you are giving to qualified nonprofits (or following expenditure responsibility rules when the organization is not a registered nonprofit), you are fulfilling your foundation’s philanthropic responsibilities.
I don’t have a specific issue area, like the environment, that is important to me. I want to support my local community as a whole.
Your foundation’s focus can be a geographic area in addition to or in lieu of a specific issue area. But if you choose a geographic area, consider defining it narrowly and remaining vigilant about sticking to that definition. For example, choosing New Jersey as your local community could be too broad, but concentrating on your county or town would allow you to engage more deeply, understand the needs in the area, and really see the impact of your grants over time.
I worry that picking focus areas some family members do not like will alienate them.
This is a very real concern, although unclear and unfocused grant making may frustrate family members too. When selecting focus areas, it is important to include all members who are currently involved in the grant making. Once defined, the family can set up a system to review the foundation’s mission at regular intervals to take into account evolving opinions (we suggest reviewing and refreshing every five years). Also, there is increasing evidence that future generations are even more interested in moving beyond funding, contributing “time, talent, and ties,” all of which favors narrowing down.
My friends and colleagues frequently ask me to support their causes. What if their causes don’t fit the foundation’s mission?
By choosing a narrower focus area, you give yourself a valid reason to turn them down: “Our foundation focuses on early childhood education and as a family, we have agreed to stick to that.” If this is not a tenable option, you could also set aside a certain percentage of your annual grant-making funds for these causes.
Boxing in your foundation’s mission provides boundaries and focus for its grant making. It makes your mission clear to nonprofits and provides family members with defined direction when considering grants. If you haven’t yet built your philanthropy “box,” whether for your foundation or your personal grant making, try it and see if it engages you more meaningfully.
Diana Tyler is an associate director at Arabella. She provides strategic guidance, grant-making expertise, and operations support to Arabella’s managed foundation clients. Find her on Twitter at @DianaITyler.