When properly designed, family foundations can provide a meaningful framework for business families to work together outside the day-to-day operations of the company. Family contributions can help build community, support research, address society's needs, or foster education programs. The process can be gratifying or a minefield of tensions. But all too often, these institutions, conceived in a spirit of generosity and social responsibility, never reach their potential as a result of sibling rivalries, parent-child conflicts, or marital disputes.

Why do some family foundations run harmoniously while others are acrimonious at best? Why are some family foundations models of order and careful consideration while others seem to degenerate into gripe sessions that accomplish little?

As with all institutions, some are better than others. The following two fictitious examples illustrate the range of relationships we have seen in family foundations:

The Galligher Family Foundation

Administered by three siblings, the E.H. Galligher Foundation has an endowment of $20 million. Their widowed father established the foundation more than thirty years ago and clearly articulated that education and social welfare were his vision of family philanthropy.

From the inception, Mr. Galligher brought his three children into the administration of the foundation, listening to them and asking for their ideas. He hired advisors to help educate his children in his areas of interest as well as in the grant decision making process. Through the years the Galligher siblings began to involve their own children following the pattern established by their father. Relationships between the father and the siblings were open and energetic ensuring that foundation board meetings were enthusiastic and focused. When Mr. Galligher died, the siblings were well prepared to take over the foundation as family trustees.

The Ester and Stanley Keller Foundation

The Keller family foundation was formed forty years ago by a couple with divergent philanthropic interests. From the beginning the foundation was characterized by disagreement and lack of a unifying vision between the founders. When the founders died, the two children were poorly prepared to continue the foundation's work.

Following the death of their parents, the two children were faced with running a foundation they knew little about. Although the two of them did not get along, they agreed to hire an experienced administrative staff to keep the foundation running. The grandchildren came on the scene with the same mixed interest in the running and purpose of the foundation. Some were enthusiastic while others had little interest in the process of deciding on the annual grants given by the foundation. When the time for awarding the grants comes each year, it's always a last minute, impulsive process.

Why are these family foundations so different? Both have similar assets and are technically and legally well established. Their differences are not structural or organizational but how the successor generations were prepared to handle the responsibilities of the foundation. One family had an established system for introducing the siblings in the management and deliberations of the foundation and the other clearly didn't.

A look into the inner workings of these two fictitious composite family foundations raises questions for all family foundations and their advisors about ways to enhance their effectiveness. Here are a few recommendations:

• Promote curiosity about the family history and relationships patterns that precede the establishment of the foundation.
• Plan a yearly family weekend retreat to build positive family relationships.
• Create a vision of family philanthropy intelligently and responsibility.
• Strive for agreement on a common set of principles, goals, and objectives for the foundation.
• Include experienced non-family members on the foundation board in order to provide calmness and objectivity in grant-making decisions.
• Consider hiring professional staff to assume the administrative responsibilities and tasks of the foundation.
• Develop ways to maintain the boundary between the work of the foundation and more long-standing family relationship issues.
• Prepare the younger generation early and carefully for the future stewardship of the foundation.

A family foundation can provide an exciting opportunity for families to learn to work together effectively and generously around a shared vision of philanthropy. Families with a history of cooperation, good humor, and mutual respect are most likely to be successful in managing a family foundation over the long term.

Katharine Baker is a partner with DC-based Working Solutions. You may contact her at bakerkg@aol.com.