Is your philanthropy doing any good?

Next generation successors are expected to boost the multi-million dollar philanthropic efforts of their family businesses over the next decade but only half of family offices surveyed are checking on the impact of their goodwill.

Research by Moore Stephens revealed just 50% of family offices assess the effectiveness of their charitable contributions. While a significant 86% said measuring impact as important, only half have the metrics in place to find out.

“High net worth individuals are risking the effectiveness of their philanthropy by not measuring the impact of their donations,” a Moore Stephens spokesperson said.

The accounting and consulting network said the aim of philanthropic activity for many high net worth individuals was to secure their legacy by making donations which make a genuine impact on a significant issue.

A “critical part” of achieving this aim is measurement of a donation's effectiveness.

Moore Stephens partner Geoff Woodhouse said the choice of a major philanthropic donation is one of the biggest decisions a family office will ever make, “but it seems that the rigour applied to investments is not always applied in the same way to donations.”

Moore Stephens said the keys to successful philanthropic donation include:

• Undertaking comprehensive due diligence on candidate charities before engaging
   
• Working collaboratively throughout the process with the selected charities
   
• Assessing progress and impact of donations against metrics agreed prior to donation
   

Woodhouse said some of the common ways to measure impact are:

• Sophisticated foundations use quantitative measures like the Impact Reporting and Investment Standards published by the Global Impact Investing Network
   
• For community projects there is no substitute for “boots on the ground”
   
• Measure outcomes (such as reduced infections) rather than outputs (such as the number of mosquito nets delivered
   

Asked how he thought family office philanthropy would change over the next decade, Woodhouse said his firm is already seeing “more sophistication” and families pledging more and more to philanthropy.

He expected an increase in social investment products and a rise in estates allocating more than 50% of revenue to charitable causes.

“In our experience philanthropy is the leading means of engaging the next generation - our largest family office clients have all involved their children in philanthropy,” Woodhouse said.

“In many cases it the younger generation who lead the philanthropic foundation and, in one case, the family nanny.”

Other findings in the survey include:

• Educational (81% of family offices surveyed), arts and culture (70%), and youth development (64%) are the most popular philanthropic causes chosen by family offices 70% of family offices now make their philanthropic donations through a family foundation structure
   
• Supporting the founders' legacy is seen by family offices surveyed as the most important aspect of philanthropy