“Most family foundations are pretty small, and families are pretty passionate about what they do,” Green explains. “They like to do the management themselves. And [accounting and legal work] related to compliance is already outsourced, in that family foundations are already working with a lawyer or CPA.”

Despite this, many first-generation family foundations reach a stage in their life cycles when passion begins to flag, and backers must decide whether—and how—to continue. Indeed, an intergenerational change is often the catalyst for families to reconsider the amount of time and effort they are willing to devote.

Green anticipates that many of the philanthropists who launched foundations in the 1990s will eventually succumb to founding-family burnout. As these first-generation donors die off or discover just how much work it takes to achieve their philanthropic goals, outsourcing may provide a welcome respite.

Shrunken Overheads
Those of us who run foundations with endowments ranging between $10 million and $50 million may find that outsourcing is a good way to minimize our overhead by eliminating the need for an in-house, full-time staff, the expenses of which can eat into resources that would otherwise go to grant making. “At that asset level you’ll be making pretty significant grants, and you need to have a feel for organizations you’ll be supporting,” says Charlie Casey, general manager of Pacific Foundation Services, which works with private foundations to design and implement their giving strategies. Outsourcing administration allows us to direct our efforts toward researching potential recipients rather than toward overseeing our foundation’s administrative and operational tasks.

With larger foundations—those with more than $50 million in assets—the issue becomes a little murkier. “Large foundations can outsource,” Casey notes, “but they can get so involved in the depths of grant making, and spend so much time, that it makes sense for them to set up their own staffs.”

A variety of entities—from individual consultants to financial services behemoths—are looking for our business, and the foundation consulting industry has become increasingly competitive. For example, in the past decade many private banks have created programs to administer foundation assets and advise on grant making. Consulting firms offer strategic advice and help with administrative logistics, such as compliance. They may guide our attempts to craft a mission statement, or help tailor new grant-making programs.

Consultants can also take a larger role and run the day-to-day management and administration of our foundations. Participants in this field may come and go quickly, according to Andrew Schultz, deputy general counsel at the Council on Foundations. “I would imagine they come into, and blink out of, existence almost constantly.”

Deciding to Delegate
To determine whether we want to outsource some of the functions of our foundation, we first need to consider whether we are spending our own time on tasks that are not central to our mission—or on tasks we would simply prefer to pass to someone else. “I would compare the time I would want to spend as a trustee on responsibilities, such as due diligence and oversight, with time I spend on finding exciting, interesting grants and the best opportunities,” says Mary Phillips, vice president and treasurer of Grants Management Associates (GMA) in Boston, one of the first companies to provide comprehensive management and training services to foundations.

TOP VIEW A plethora of consultants, banks and other professional services firms offer our foundations aid for everything from routine bookkeeping to evaluating grants and strategy. Whether outsourcing some of our foundation’s administration makes sense for us depends on the firm’s skills, and the extent to which we want to delegate some of the less inspiring aspects of our philanthropic pursuits.

We should then look at the potential savings in both money and time, Phillips advises. If we operate from our own office, we have to manage a facility, set compensation for staff and family members and manage our employees. If these often-mundane tasks overwhelm us to the point of dulling our interest in our philanthropic pursuits, it may make sense to outsource one or more.

What we want from an outsourcing firm is often determined by where we are in our foundation’s life cycle. “We find foundations come to GMA when they are just getting started because they want help putting things like governance in place; then they go off and [work] on their own,” Phillips says. “They need a few years before they come back and say, ‘We’re not having any fun.’”

That is when the consultants step in; competent firms can help the foundations evaluate the impact of their grant making, create a new grant-making program or resolve other challenges that have drained the enterprise of its fun.

Cybersourcing
Finding the right firm is crucial. Local grant-makers’ associations can provide recommendations and references. There is a list of regional associations on the Web at www.givingforum.org/ralocator.html. The Council on Foundations (www.cof.org) also has excellent resources.

One of the more recent developments in the outsourcing field is the emergence of companies that use Internet technology to service foundations. Douglas K. Mellinger is a former technology entrepreneur and vice chairman of Enherent, a software development company. After he set up his own family foundation, he wondered if there was a way to establish one without mountains of paperwork, endless meetings with lawyers and months of waiting. With a group of cofounders, Mellinger created Foundation Source, a Norwalk, Conn., company that he claims can get a foundation up and running in three days. He says Foundation Source can also handle day-to-day administration and management, as well as federal and state regulatory compliance requirements. 

Boston-based Fidelity Investments runs another Web service. In 2002, the asset management giant launched Fidelity Private Foundation Services. This offers donors their own secure websites with access to make grants, view foundation records and obtain legal and accounting information relating to regulatory compliance. Fidelity will also file the paperwork necessary to establish a foundation.

Both Fidelity and Foundation Source say their digital approaches are easier and less expensive than hiring specialist lawyers and accountants. However, both have their limits. Foundation Source Chairman and CEO Daniel M. Schley admits that the firm is not prepared to evaluate grants or help grant makers collaborate with one another. Instead, it aims to complement the services of other philanthropic advisors. As its clientele grows, Foundation Source hopes to build an online community of private foundation backers who can share information.

Because of the wide range of expertise and approaches consultants, banks and even law and accounting firms offer, we should carefully weigh the experience of each against the types of tasks we intend to delegate. Recommendations from our peers are often crucial to finding a competent firm, and one that is a good personal match. With an institution so central to our families’ missions and public personas, this is no small consideration.  

Questions to Ask Before Outsourcing
• How many former foundation executives work for your firm and what are their specialties?  

• Do you have an administrative staff that can provide an attractive public face for my foundation?

• What types of foundations comprise your client base and what types of grant making do they practice?

• Do you assist with grant-making strategy and execution or do you solely provide administrative support?

Art by Jim Frazier