The new Family Enterprise Exchange (FEX) is rolling out its plans across Canada for exciting new programming to empower family enterprises and their advisors.
As part of the FEX Xchanging Ideas event I was exposed to a wonderful video of an interview with James E. Hughes, Jr., Esq. (“Jay”), the pre-eminent family wealth expert and philosopher of the family. His message resonated with me regarding family enterprise generally, and regarding family philanthropy in particular. The qualities for building a healthy, strong and resilient family enterprise so easily converge when the family embarks on philanthropy together.
So often we think of wealth as purely financial, but Jay refers to the Five Capitals of Wealth. Each of these capitals is critical to the well-being of the family enterprise and require thought and attention. He describes the five capitals as follows:
- Spiritual capital is the vision that guides a family, and reflects upon the purpose and vision to flourish;
- Social capital is what brings consensual decision making and focuses on the social impact the family wishes to have;
- Intellectual capital includes the governance of the family systems, rights and responsibilities of each family member and considers the family as a learning community;
- Human capital focuses on the physical health, values and personal development of the family and its members and the development of thriving relationships;
- And then there is Financial capital, the numeric score card and the financial resources to carry out all the other capitals.
Jay held up his hand to demonstrate how and why to concentrate on all the important aspects of the enterprise – not just the financial. Consider each of your fingers as one of the capitals: the thumb as financial capital, the index finger as human capital, middle finger as intellectual capital, ring finger as social capital and pinky as spiritual capital. With the thumb sticking up, and being dominant, all the other fingers can fold in and disappear as they become a closed fist which leads to an unhealthy system which will not survive.
But turn the thumb on its head, so that the focus is on the other fingers, the other capitals, and all these capitals will thrive and flutter with energy, supported by the strong thumb. In this way the enterprise will have dynamic meaning and purpose and will flourish.
Jay uses this hand metaphor with families. He explained how when families meet to discuss issues they may state a clear intention at the beginning of the meeting to focus on spiritual, social, intellectual or human aspects of the enterprise, but so often, the conversation reverts back to numbers. Numbers and technical issues are just something we are more used to talking about and they have an objective element to them. To get the family back on track, Jay simply holds up his hand and turns it so the thumb is on the bottom. This leads to some chuckles and an “Oh right. Let’s get back to what we really want to be talking about here.”, which then refocuses the conversation on the other capital which really deserves the family’s attention.
Family philanthropy is also most effective and at its best when attention is given to all five capitals. To support their spiritual capital, the family establishes an overall vision and purpose for their philanthropy which reflects their values as a family. To support their social capital they build consensus on the impact they wish to have in the world and monitor and evaluate that impact. To support their intellectual capital they develop strong governance and processes to facilitate effective granting relative to their goals and based on knowledge and understanding of how needs are being addressed. To support their human capital, they engage family members in the process of philanthropy in ways that build on their strengths and develop skills in research, critical thinking, relationship building, assessment and accountability. And finally, to support the financial capital, tax savings are maximized and assets responsibly invested in order to meet the objectives of all the other capitals.
When working with families, I too find that the conversation often drifts to the financial and the technical. I look forward to using Jay’s handy little trick of holding up my hand and turning my thumb on its head, to remind us all to refocus on the many other wonderful aspects of philanthropy and how philanthropy has the power to assist the family to thrive.
As a philanthropy advisor, I work with families and individuals to create and facilitate a safe and productive environment to articulate values, interests and goals. Together we develop and implement a plan to make giving meaningful, satisfying and effective.
For more information on how I work with clients to assist them to give with heart and for impact please visit the approach and services pages on my website or contact me at janice@jlmphilanthropy.com.