Brian Kenny: In 2001, there were about 3,200 family foundations in the US doling out $6.8 billion. By 2015, the number had exploded to more than 40,000 with grants totaling 21.3 billion. Today, the business of giving is booming, but there's work to do.
A recent study by the National Center for Philanthropy sites the number one concern of founders is how to sustain what they started. Today, we'll hear from professor Christina Wing about her case study entitled, Bill Cummings: The Cummings Way. I'm your host, Brian Kenny, and you're listening to Cold Call, recorded in Klarman Hall Studio at Harvard Business School.
Christina Wing is a senior lecturer at Harvard Business School and a graduate. Prior to teaching, she held a variety of roles in finance and general management, including president and CEO of a family office where she oversaw a variety of investments and philanthropic activities.
And today, we have a special guest in the studio: the case protagonist, Bill Cummings ,is with us. Bill is the founder of Cummings Properties, a commercial real estate firm in greater Boston, and he and his wife Joyce founded the Cummings Foundation in 1986, which has nearly $2 billion in assets. Is that right, Bill?
Bill Cummings: Just about.
Brian Kenny: Wow, that's pretty impressive. Thank you so much for being here today. Great to have you in the studio with us. And Christina, great to have you here as well.
Christina Wing: Thank you.
Brian Kenny: I think people are going to be really interested in hearing more about Bill's story and about the foundation and about the complicated question that the case brings to the surface. I think, obviously, people understand the importance of philanthropy in the world. Most of us are not in a position to be as generous as Bill has been but, and everybody gives in their own way. And I think there's a lot of lessons to be learned here, just in the core message of the case. So, let me ask you to begin, Christina, by telling us how does the case start?
Christina Wing: So, the case starts with the management team sitting around a table, which they do most Monday nights, to discuss the business. But in this case, they're discussing the foundation, and what kind of impact they're going to be able to have, how it's going to be run, and how the foundation is going to be run either in conjunction with Cummings Properties or separately, and what does that look like?
Brian Kenny: And tell me how does this relate back to the work that you do, your interest, and your scholarship and teaching?
Christina Wing: So, I'm very interested in families in business. I think that they have a disproportionate ability to affect society. And, sadly, many of them don't fulfill that responsibility and/or cut it just the right way. In this case, Bill has aggressively built a business and built a foundation. And so, wherein the kind of tension is, what happens next, who runs what part, how does the money get sent out to everybody and given away? And also, how do you take care of the great business that's been created? So, for me, it's a different example of an entrepreneur who's done two things differently than other people, both a business and a foundation.
Brian Kenny: Side-by-side.
Christina Wing: Side-by-side.
Brian Kenny: So, we'll get into all of that. Why don't we start there? Can you just describe Cummings Properties to us? What's the business like?
Christina Wing: Cummings Properties is a rare jewel, I would say. It is a development company that has been built on grit and doing it a different way. I think most people that think about real estate development, think about debt. The first question is, what's your debt percentage? At Cummings, it's zero. They do not put debt on property to build it. They might put some on afterwards after the building's up, but minimally, if at all.
Brian Kenny: So, how do you do that? Everyone out there who wants to build a house wants to know the answer to this question.
Christina Wing: So, it takes great discipline and great belief in yourself. Bill did this from the beginning. His first project, he built it and then he sold it, and then he used that cash to build the next one. With that comes some great benefits, one of which is, he is known for not having budgets. This would never fly if you had debt finance people. They'd want to know down to the dollar what was happening. Bill's philosophy has been that a budget actually can work against you because people feel that, as long as they're meeting the budget, it's okay. His philosophy is, "We can always do better," and so they do, but they take on projects others wouldn't. They're not afraid of what would be considered risky projects. They go into them with calculated risk. So, that means they have to buy it at the right price point.
Brian Kenny: Bill, but could you just start, maybe, by telling our listeners a little bit about your background? You have an interesting childhood. You're a local Boston guy. I am, too. So, you grew up in the area, but talk a little bit about your childhood and the influences that led you on the path that you're on.
Bill Cummings: Brian, I'm very much a local guy. Most of my early years were in Medford. I started growing up in the early years of World War II. My dad was a worker at Fore River Shipyards, at the time, and building ships down in Weymouth and Quincy Harbor. The whole time that my earliest memories of a home are living upstairs across the street from the car barns on Salem Street in Medford. They used to be the streetcar barn over there. Now, it's a discount store or some sort. I've lived over a liquor stand and a taxi company. I had a very happy childhood though. There were no kids in my neighborhood, and I found other ways to keep busy and I started doing little jobs for people.
Brian Kenny: What kind of jobs did you do?
Bill Cummings: Oh, I'd sweep the sidewalks of the storefronts that surrounded my block, get to know the storekeepers. They'd give me a little something once in a while. Later, in the winter, I'd be begging them. I got a little bit bigger, I'd shovel their sidewalks for them. Still later after that, I was washing their windows, their store windows. I'd buy a professional type window brush and a big squeegee, and had a marvelous time. I made a lot of money.
Brian Kenny: So you started in property at a pretty young age. It's always been about property for you.
Bill Cummings: It sounds that way, doesn't it?
Brian Kenny: What was your career path, post-college? How did you get started on the career path that you're on?
Bill Cummings: I graduated from Tufts University in 1958 and I took a job right out of Tufts with Vick Chemical Company, Vick Chemical. Most of us wouldn't know it by that name, but it manufactured Vicks VapoRub.
Brian Kenny: Was there a pivotal moment for you in your career, where you realized that you wanted to make the turn to the commercial investment side?
Bill Cummings: That came quite a bit later. I worked for another three years. First I worked with Gorton's of Gloucester in a sales position, the seafood people. At some point, I determined that I had always wanted to work for myself, when I was passed over for a position that the president told me how qualified I was but, "Just be patient. We have to give this job to somebody else, but I was just too young. He deserved it because he'd been around a long time. We're going to give you a nice increase in salary, but you... You can have another division if you want it, but you can't have that job." I said, "Well let me have the job and give the other guy the salary." And they wouldn't have any part of that. I can understand that now, but that was the time that I determined it was time to go into business for myself.
Brian Kenny: So, that was sort of a turning point, where you had a chance to gather your thoughts and think about what you wanted to do. The case pays a lot of focus on the management team that you've been able to put together, so I want to talk a little bit about your philosophy and identifying talent and the people that you choose to run the organization. Do you have a special way of thinking about that?
Bill Cummings: Well, I think first of all, that we're building an organization for people who are hopefully looking for a career and not a job, and I thought that way from the very beginning. The company started, Cummings Property started in 1970 and there's no one there from the beginning, except myself now, but we've got a large number of people who have coming up on 40 years.
Brian Kenny: Wow.
Bill Cummings: Our management team averages 25 years with the company, the 10 people in the senior management. This doesn't happen too often anymore in businesses, but we're looking primarily, though, for the person and not the resume. We don't care about the resume nearly so much.
Brian Kenny: Christina, you've had a chance to observe Bill in his element. What kind of a leader is he? I'm not going to ask him to answer that, because it's hard for him to answer, but how would you describe his leadership style?
Christina Wing: I'd say it's very consistent. He treats everybody the same, so that's wonderful. The first time I went to visit the company, he walked me around the floor and introduced me to everybody by name, and gave me a little anecdotal story about them. There's no extra emphasis towards the president versus somebody else in the company. His style is tough, however. I mean, he's a hard worker. They work hard, and they're in the customer service business. And so, I mean, that comes across, and that's what you need to stay in a service business this long. With that toughness is a twinkle in the eye of kindness. Many employees told me big mistakes they made along the way, where they were called into Bill's office. He would ask them what happened and tell you this, that, and the other, and then say, "Okay, let's not let it happen again." And so, I think that the combination of setting guardrails to set high expectations, being kind but being firm, is how I would describe... You know, 50 years of a leadership style typically wouldn't be consistent, and it's pretty consistent across the board, when you ask people.
Brian Kenny: The case has a reference to the Cummings Way, Bill. What's the Cummings Way? How would you describe that?
Bill Cummings: I guess, as far as the real estate business is concerned, it's doing things in a very contrarian way. Christina mentioned earlier that we rarely borrow, and that's totally against all real estate principles because everything should be done with borrowed money, never have your own. That's what's important. And, it just isn't the way we do it. Another thing we would have always done is to personally guarantee anything. From the very beginning, I would personally guarantee any mortgage because I would save a quarter point on it easily, at that point, and that made a big difference. It cut our expenses. I knew we were going to pay the bill. I knew we weren't going to default, and we never have. I've never come close to that, when we did have mortgages. And then, somehow or other, it just became time to be debt free. That's a parental influence. My work ethic is a parental thing. My dad worked dusk to dawn in the summertime, when he could paint houses, was his principle work after the war. And I had that as a... That was the way people worked. That was what I saw and what I absorbed, and have always done that.
Brian Kenny: So you had good role models, and you became a role model to the people who worked for you.
Bill Cummings: I hope so. And it's certainly, it's a lot easier to lead people who feel they're not in it alone, that I'm out there doing whatever they do. I've dug an awful lot of, used a shovel an awful lot since I've been in the real estate business, and ruined a few pairs of suit pants in jumping down into trenches when somebody needed to go down and look at something and talk about a situation. If the people are going to talk about me, I'd rather they... If they're colleagues, I'd rather they talk about me being down there with them, rather than yelling at them or something, because I have a way of doing something.
Brian Kenny: Christina, the case describes a point, kind of a turning point for Bill and Joyce, his wife, when they decided to broaden the scope of what they were doing and look at the foundation. You've worked with a lot of families who have foundations. How common is this? Is this a phenomenon that that repeats itself when somebody reaches a certain level of success?
Christina Wing: For many years, Bill and Joyce were giving a lot of money away and nobody knew who they were or what they were doing. So, I think the way they set it up, really under the radar, is very different than how other people have done it. It's also interesting in that, I think that, when you typically hear of people that are giving a lot of money away, they're fancy, fancy people. They're not fancy people. They live in the same house. They haven't changed how they live, now that they have all of this money. And so for them, the way it's been described and the way I see it, they really didn't think it was theirs to keep. They thought that, what are they going to do with it all? And so, giving it away made a lot of sense, but it's hard to hear that. It's hard to believe that, but it's true in this case.
Brian Kenny: Bill, is that true?
Bill Cummings: Oh, very much so.
Brian Kenny: What was your vision for the foundation? What was the conversation you and Joyce had when you decided to do this?
Bill Cummings: We didn't really have a vision, starting out, Brian. The very earliest day I was in business, it was 10 percent went to charity.
Brian Kenny: Wow.
Bill Cummings: Most of that was expensed along the way. Once we started the foundation then we were able to gradually put a building or two here or there into the foundation. So, it was building an endowment. We needed to build something as a base for the foundation to do something meaningful, at some future date. So, we were more intent on that for a while.
Brian Kenny: The case describes your foundation as an operational foundation versus a sort of a grant making foundation. Was there a particular reason that you decided to focus more on the operating side?
Bill Cummings: The first major activity was to establish an assisted living community, not-for-profit, in Woburn. Woburn had a municipal hospital that closed down, went bankrupt. We purchased that with the foundation, and converted it to serve 115 or 20 seniors. We didn't follow any books. We didn't have the benefit of the lessons and training that many people have in that area, in the foundation or in the assisted living community, but that was the first thing we did. And in those days, and today as well, if you're not making grants, you're better off as a foundation to be an operating foundation.
Brian Kenny: Because then you have at least some role to play in the success of the grant.
Bill Cummings: Absolutely. And we're involved on a week-to-week basis today, and now there is a much larger one. The two combined, New Horizons in Woburn and New Horizons in Marlborough both provide homes for, combined, about 380 or 90 seniors. Once they move there, one of the nice things is they move in and there's never an increase in rent. If somebody can be there 20 years and they're paying the same rent... I say rent, it's a monthly fee is the technical word, because it applies to a lot more than rent. It pays their meals and housekeeping and entertainment and local bus service, and all the things that go with that.
Brian Kenny: They don't have to worry about that going up. That's just, that's simple for them.
Bill Cummings: Those things, they know what they're going to pay as long as they're there, and they can plan. It's a big relief for people not to have that hanging over them, that I might get another rent increase.
Brian Kenny: No doubt.
Christina Wing: And, there is an important addition there. These are community based, so these are based on people that their family either currently lives in the area or they grew up in that area. So, it's like going home. They go in there and they see buddies from football from eighth grade, and things that just aren't existing in other places. And similarly, they've put together a menu that's more consistent with what people were eating in that neighborhood. It's more fun. It's not like the bad alternative, as you get older. It's a place people want to go.
Brian Kenny: Sure, yeah. How many foundations are set up as an operating foundation versus a grant one? Is that more common or less common?
Christina Wing: Much less common.
Brian Kenny: It's a lot more work, right?
Christina Wing: It's a lot more work. I mean, it's constant work, because it's not giving money and not time. The combination is a lot.
Brian Kenny: You have to obviously care, like the way clearly Bill and Joyce cared about the outcome of this community that they've built. It involves a whole different level of investment, I guess, beyond just the money.
Christina Wing: It does, and it puts your reputation at risk if you get it wrong.
Brian Kenny: These things are happening kind of side-by-side. What was the effect, positive or negative, of clients as they learned about the foundation, the work you were doing there, and how it factored into the business model?
Bill Cummings: Brian, that's a very interesting aspect of things, that some of them will tell us they just love to know that their rent is going to a good cause and not to buy a bigger boat for Bill and Joyce Cummings, or whatever; others don't care at all. The same as is true with the people, our colleagues in the company. Some of them absolutely are... They thrive on the fact that the work that they're doing is for a cause. Most of them are in some range, they're in that range. A few of them don't much care. There's a few that will tell us that, "Why are you giving all this money away? Give us more of it."
Brian Kenny: Sure.
Bill Cummings: And, that's logical enough they would think that way. But where we give so much of it to a wide variety of organizations, there's no one specialty. We're trying to reach a diverse cross section of the whole community, locally. We work in three counties: Middlesex, Suffolk, and Essex County and then we do a couple of things outside of that. We've just contributed a substantial amount of money for a new university in Rwanda, the University of Global Health Equity, which is being run by Partners in Health and Dr. Paul Farmer. And we did that in conjunction with Bill and Melinda Gates Foundation. We actually made an initial proposal that had a matching grant. Partners in Health was having difficulty in raising that money, so we were able to talk to Bill and Melinda and they came up with a matching grant. But they were highly instrumental, early on, and that's something that we've been... It's so gratifying to have another venue, if you will, outside of greater Boston. It hasn't changed the basic purpose and goal of the foundation, and that is to make a difference in the area where our money came from. Almost all of it was developed locally, and we want to put it back there.
Brian Kenny: You've also got these other global, the other global reach, which is fabulous. Bill and Melinda Gates, of course, are pretty well known for the Giving Pledge. There was much ado made about the Giving Pledge when it first came out. I don't know if it's as top of mind for people, but can you remind our listeners, Christina, what that was all about?
Christina Wing: The Giving Pledge is, basically individuals sign it and they commit to give all their money away to charity. Now, where I think there is a misunderstanding is, I think many people think that means that Bill and Joyce or whomever are done, that you sign the Giving Pledge and then there's a roadmap and the money goes away. Well, there's not. You write your grant statement of what your intentions are, but you still need to give the money away. So in 2011, when Bill and Joyce signed the Giving Pledge, they were the first couple in Boston to sign it. And they were somewhat hesitant to sign it, given the publicity they would get, and given that suddenly neighbors would know that they were billionaires, because people didn't know that. They were encouraged by the Gates to do that, in order to continue to get more people to understand what it was and that others should sign it, but it's not a roadmap to giving. It's a roadmap to give away, but not how to. And so, that is something that I still think, I poke Bill about this all the time, "It's a lot of money. Still haven't figured out how we, you are giving it all away."
Bill Cummings: Actually, seated as we are here in the Klarman building on the Harvard Business School campus, I don't think it's inappropriate to point out that Seth and Beth Klarman, in whose honor this building is named, were the second Massachusetts residents to join the Giving Pledge.
Brian Kenny: That's right, that's right.
Christina Wing: Good point.
Brian Kenny: What prompted you and Joyce to sign it? What was that conversation like, if we were listening in?
Bill Cummings: Brian, the conversation for us was a little different than it would be for many people because we had already determined, Joyce and I, that we wanted to give most of our money away, starting during our lifetime. And so it was very easy, in our case, to do that. Our desire to do it was to learn more. There's a lot of education in the Giving Pledge organization, where people are sharing information about what programs they use, what's really effective, and what other people might want to try. One of the ones that we talk about, extensively, is a very simple program that we actually don't work it through the foundation, but we work it through Cummings Properties, and that is every employee gets a set amount of money every year to give to charity.
Brian Kenny: Wow.
Bill Cummings: That's either $1,000 or $2,000 every Thanksgiving time. We call it Employee-Directed Giving at Thanksgiving. That's something that any company can use it. As I'm sure you've got listeners, and hundreds of thousands of them perhaps, that are running businesses of one type or another and maybe sometimes having an angst as to, "Where do we, where do I give my money away? How do I do that more effectively?" Think about using the people that they work with on a daily basis and let them make decisions about incremental pieces of it, whatever the amount might be. And it really, it's so effective and so well received. The staff, the colleagues just feel really a part of it. They see the money, some of the money being allocated to them to hand it out.
Brian Kenny: We actually have faculty that have done studies and research on this, that talk about the benefits of giving versus receiving, and how much people feel better about that. And hyper-local giving is very, an important part of philanthropy these days, so that's a terrific program that you guys are doing. Let's talk a little bit about the central question in the case, the challenge in the case that the team is thinking about as they're sitting around the table at that Monday night meeting, which is, "How do we transition this? How do we hand the reins over to somebody and sustain the momentum that they've built?" Christina, can you comment more on kind of the complications that arise with that question?
Christina Wing: Well, the business has been built around development, and 99.9 percent of the employees work in Cummings Properties in terms of development. The employees that work on the foundation, it's primarily through volunteer time and other things. This is all working right now, as Cummings Properties is still developing new projects and you're still seeing the foundation go up and, most ,.importantly, Bill and Joyce are still here and able to have their hand in both, a little. There's a great management team running Cummings Properties that is fabulous. The foundation, as other mandates come into play and other goals, it's going to need a larger team. Giving money away is a real responsibility, but you also need to manage the money that you've accumulated. So, there are hard assets that are real estate assets, there are liquid assets that need to be invested, and then there's giving. The goal is to maximize the giving, and so you have to get the other two sides right. Down the road, there could be some shifts in risk profiles as other people are put in the position to make the giving decisions. So, that's the tension.
Brian Kenny: That's the tension. And the case does talk about the fact that, Bill, your children opted not to go into the real estate business with you. So, you've been able to build that, with folks that you brought in from other places, but they do have a seat on the board of the foundation. So, what are some of the tensions that you have to balance between those two dynamics?
Bill Cummings: Fortunately, very little tension, really. Our children are involved in whatever they're doing, a variety of things, and at least three of them have a real interest at some point in becoming involved in the foundation.
Brian Kenny: That's great.
Bill Cummings: They're going to pretty much think of completing their actual careers, which are really precious to them just like ours are to us but something that they can do in later life, and be active and involved with the foundation. One thing we've always had to pay attention to is that we don't lose track of the company though, and keeping them…
Brian Kenny: But the company makes everything else possible.
Bill Cummings: That makes everything possible. A hugely disproportionate percentage of the foundation's assets are in real estate. We've got to keep the buildings filled. We've got to keep tenants in the buildings. So, we try to pay a lot of attention to that. We have good properties. We've got 110 million square feet of real estate in 11 suburban Boston communities. We lease office space, medical practice space, warehouse, computers, laboratory space of all sorts, and try to do that in a really effective manner so tenants want to come and stay. And that's where the money, the bulk of the money comes from, that does what the foundation's going to be good at.
Brian Kenny: Steady stream of income coming from all of those sources. Christina, what are some of the trade-offs, I guess, that you make? If you transition all the property over to the foundation, are there implications to doing that?
Christina Wing: Well, short term, it's fine. As Cummings Properties still exists, and it's Cummings Properties, the actual people that work there continue to maintain these assets and work on them and have meaningful work for themselves. Long term, as Bill alluded, if you are an investment management professional and 85 percent of your assets are in one category in one state, it is pretty risky long term. Currently, Bill has a great management team. The management team are not experts at all on asset management or philanthropic giving, two things they can learn. As he said, they're contrarians but they are experts on real estate, and so it's making sure we set people up for success in the right jobs with the right goals out there, just so people feel secure.
Brian Kenny: So Bill, these are big, weighty decisions obviously, that have a lot of bearing on the future of the foundation and the business. One thing I'm curious about, as we think about the Cummings Way and the sort of philosophy that you built the enterprise on, in this day and age, do you think the Cummings Way can continue to carry the day or does the philosophy have to shift to accommodate a new generation of employees?
Bill Cummings: We're just happy to keep it going that way. It'll change, the roadmap that Joyce and I lay out, and for long-term thinking anyway, is not to try to control anything and certainly not to control it from the grave, but to provide advice as to what we think should happen, at the same time authorize our successors, the people in control, to do what they think is the right thing.
We've got a large number of volunteers right now who are, have no connection with the company at all. There are 107 or eight or nine people who are oftentimes retired, municipal employees or former mayors or city council members who are... includes many people who had tradespeople, tradesperson jobs with the company, perhaps a retired letter carrier, and several college presidents are actually, have been very active in the foundation from time to time. We're just so grateful for all the work that they're doing. They have a free rein to really, to guide us, is what's happening. There are something more than 600, probably more than 700 now, different organizations in greater Boston that have received grants of between a million and $2 million, and neither Joyce nor I would know as many as 10 percent of those organizations.
Brian Kenny: Well, it's a great model. I hope it lasts for generations to come. Christina, have you taught the case in class?
Christina Wing: Yes. I've been able to teach it several times. Bill has been present, as have his management team, and as we direct the students to ignore them, say what you're going to say and then discuss it, they loved the case. The beginning of the case is the American dream, that you start, you know you want to do something, you do it, you build it. And, where they come out, their definition of the Cummings Way... My students, for the most part, at least the MBAs, is that each thing he's done has been the Cummings Way. So, the way he built the business in terms of development has been the Cummings Way. The way he's gone about philanthropic giving has been the Cummings Way. And so, whatever the next result is that's going to be the hybrid of the two in many ways, will be the Cummings Way, again. It will not be something that we see in other places. Doesn't mean others can emulate parts of it, but to execute on it, you have to have the team and the grit and the belief that he has brought with his people. And so, it's unique but it's awesome. It's awesome.
Brian Kenny: Thank you both for joining me today. Really interesting case.
Christina Wing: Thank you.
Bill Cummings: Thank you for putting it all together and getting us here today. It's been a lot of fun.
Brian Kenny: If you enjoy Cold Call, you might like other podcasts on the HBR Presents network. Whether you're looking for advice on navigating your career, you want the latest thinking in business and management, or you just want to hear what's on the mind of Harvard Business School professors, the HBR Presents network has a podcast for you. Find them on Apple Podcasts or wherever you listen. I'm your host, Brain Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School on the HBR Presents network.