S3: Douglas Bitonti Stewart #89

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Douglas Bitonti Stewart

Today we head over to the Impact Investing Inglenook to chat with Douglas Bitonti Stewart about his recent article titled ‘Impact Investing and the Development Professional: Learning to Ride the Wave’. You can find this published article in the Fall 2017 Issue of Advancing Philanthropy Magazine.  Doug shares his very unique perspective on fundraising in the philanthropic space and how that relates to impact investing. Stay tuned until the very end for a special song from a Detroit artist.

 

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Welcome to another episode of the Bonfires of Social Enterprise. This is Romy and today we head over to the Impact Investing Inglenook to chat with Douglas Bitonti Stewart about his recent article titled ‘Impact Investing and the Development Professional: Learning to Ride the Wave’. You can find this published article in the Fall 2017 Issue of Advancing Philanthropy Magazine. By the way, we have a lot of links in our show notes for this episode if you want to learn more, which, I am certain, you will after hearing from our guest. Doug shares his very unique perspective on fundraising in the philanthropic space and how that relates to impact investing. Stay tuned until the very end for a special song from a Detroit artist.
Let’s jump right in to the conversation with Doug.

Romy: Well, welcome to the podcast. We're going to talk today about the article you wrote, Impact Investing and the Development Professional. I love that we're going to talk about this from the framing of a development professional because it's rarely discussed, and you have a lot of experience with it. So we'll give links at the end of where this article can be found, and so let's dive right in and talk about the overview of the article first.

Douglas Stewart: Sure. So thank you for thinking enough of the article to have a podcast about it. I love your podcast, and I think everybody should be listening to this, and I'm also really hopeful that development officers will start listening to your podcast because this is really important stuff.

To start with the why that I felt this article was even necessary. For me, having spent 20 years as a development guy, working for mostly children's hospitals, I loved that work. And after doing that for 20 years, I was just lucky enough to be asked by a family to help run their family foundation.

I never thought I was going to do that. Didn't design my career for that but was found myself ... When you've done development long enough, you start to see your role not as raising money, but you see yourself as helping people change the world. And some people do that by contributing money. Other people do that by contributing their careers.

And so I had a chance to work up alongside a family, and so, I ended up becoming a foundation person, but not because that was my goal. So in my role as a foundation person, I was seeing donors, foundation staff all learning about impact investing. And it was really exciting, and then when I looked back at my peers in the fundraising field, I looked at their training sessions, and I didn't see anything there.

And there was one article in this publication of the Association of Fundraising Professionals a couple of summers ago. It was a cover article, and it talked about impact investing, but there hasn't been anything in there since or before. And I felt like, "Okay, I'm going to pull the curtain back about what foundations are learning and put it in the context of a development officer so that they can start learning about this because there's opportunities here."

Romy: And, Doug, just for our listeners in case they don't know the terminology, how do you define a development officer?

Douglas Stewart: Sure, so for me, and when I think about that, I think of someone who is engaged in raising money for a for-impact organization, and I'll tell you why I use the for-impact and not non-profit. But for-impact organizations that are 501(c)(3)s, and their job is to help raise money for that.

Now look, that could be the executive director, that they don't have a development officer or a development person. It could be a volunteer that does that but doesn't get paid and so forth, and so it's really anybody engaged in the fundraising enterprise. And just to harken back to what I said a minute ago, so it's anybody who helps people change the world through investing or giving their resources away, whether that's time, talent or treasure.

But the classic definition is a full-time fundraising; this is what I do, this is what I get paid for. That's what this article was really, who that was written for. It was a full-time fundraiser, a profession fundraiser.

Romy: And where would normally a full-time professional fundraiser or a development officer go to learn about things like this?

Douglas Stewart: So there are national conferences like for the Association of Fundraising Professional, there's local chapters, and so they have monthly meetings. There's even another organization called the Association of Healthcare Philanthropy, which is another sort of subset of development officers that come together.

Where universities play a role, we have a university that's not too far from here that actually has 450 full-time development professionals. So for them, instead of buying their training, they make it. So they'll have a training department, and that team and different components would meet every month, and they would go deep on some kind of topic.

But I'm hopeful that a couple of things happen because of this article and because of this podcast and your attention to it, that development officers will start reading the things donors are reading. Start reading the things the foundations are reading. There's a publication called the Foundation ... Oh, my friend's going to kill me for not knowing this. It's called the Foundation Review, the Foundation Review by Grand Valley and the Johnson Center for Philanthropy at Grand Valley, Foundation Review.

It's a peer-reviewed journal. All the foundation folks are reading it, and I think all the development officers should read it. GrantCraft is an online system that the Ford Foundation created, and foundation folks read it. But I don't think develop ... I didn't. I should just own it. I didn't know when I was a development officer. I didn't read these things. So they need to start reading the things that donors are reading.

Douglas Stewart: You and I have talked about that before and the for-impact. When the development professionals grab hold of this, the good news is, is that there are a lot of resources for them to find that will already talk about all these tools. The Mission Investors Exchange, it's a great example. There's a number of, and we can talk about those other resources in a bit, and they're in the article too.

Thankfully, they won't need to see another article from me because there's so much out there that's being written for individual investors and the program folks in foundations and so on. So what I'm hoping is that the development professional will look at this and, as they did, to planned giving way back when.

That they'll grab hold of this tool, and all of a sudden, it will be one of the tools that they utilize. Program-related investments were born the year I was born. Well, I should say, they were codified in the tax code the year I was born, 1969. But they were actually created before that. The tax code was just mirroring what people were doing, and I'd be happy to give you an example of one that was even before the tax code hit if you want it.

Romy: Yeah, let's do it.

Douglas Stewart: You want it?

Romy: Yeah.

Douglas Stewart: This is a little bit self-serving. It obviously wasn't me because I wasn't born before 1969, but in 1965, Max Fisher, the namesake of the foundation that I'm very, very lucky to serve, he and a group of leaders in the Jewish Community organized a $55 million, actually it was $50 million, $50-million loan to the Jewish Agency for Israel. Now, think about this. 1965, a really important time for the state of Israel.

Romy: Oh, yeah.

Douglas Stewart: So lots of immigrants coming in, all sorts of things going on. The state of Israel is just getting its legs under it and starting to move and so forth. So they didn't have as much as certainly what we have right now in terms of health and human services departments and all of that. So the Jewish Agency is, even today, is a quasi-governmental agency-

Romy: [cross-talk 00:08:10].

Douglas Stewart: ... but it's a for-impact or what they would have called then an NGO, a non-governmental, but it was almost quasi. So that money came from 11 U.S.-based insurance companies. They collectively lent the Jewish Agency for Israel $50 million for 15 years at 5 1/2%.

The collateral was the good faith and credit of the American Jewish people, which means they didn't have physical collateral that they could just seize. And so, that 5 1/2%, I looked this up, and I'll tell you where you can see this story too. But 5 1/2%, at that time, was the mortgage rate in 1965.

Romy: Oh, yeah.

Douglas Stewart: And the only reason I know that is because I looked it up, and I wanted to see, was this a concessionary loan, right? And it turns out it was because you can't get a mortgage with no collateral, right? So it was concessionary, and it was 15 years, and they paid it off in like 12 or something.

And if you want more information of that, we do have a Max M. Fisher Archives, it's called. It's just MaxMFisher.org, and if you were to look up loan in the resource center, you can see all the original documents. You can read the loan agreement.

Romy: Wow.

Douglas Stewart: So I think that and we can get to this, but the development profession with planned giving and with other instruments inside that kind of that like charitable gift annuities and so forth, the development profession has developed tools to respond to donor interests and donor needs.

And so that's what planned giving was, and I think now that donors are creating something in terms of impact investing that they want, that now when the development professionals grab a hold of this, it's going to accelerate. It's not for everybody. It's not for every group, but it is for a lot of them, I think.

Romy: I agree-

Doug Stewart: It is for a lot of them I think.

Romy: I agree. Well, and that story is absolutely fascinating.

Doug Stewart: It's fun; it's really fun.

Romy: It's fascinating because it was before the 1967, where they got Jerusalem. That's extraordinary to me.

Doug Stewart: It's unbelievable.

Romy: It's really, really unbelievable. I love the good faith. To go back to this donor drive, and I would like to come back to some of the terminology in a minute. I want to stay on this theme, because without question the drive from the donor or potential investor, I'm going to call them the philanthropic-minded person, who wants to move the needle but wants the accountability is really driving it with estate planning attorneys, life agents, program authors, financial professionals.

It's whereas before it was either/or, now everyone's sort of forced to have the conversation. It's not happening in isolation just for the very, very wealthy anymore.

Doug Stewart: That's right, I totally agree. We all know that Fidelity Charitable is the largest for-impact organization, otherwise knows as some people call non-profits, in the country. Out of the philanthropy 400 on the Chronicle of Philanthropy, they're number one. They've been hovering in two and threes, but now they're number one.

They're amassing donor advise fund assets, and this is not against Fidelity what I'm about to say, Joshua, all these firms have these things. The question is, are they advising them philanthropically? Are they only advising them on how to put money aside, not putting money to work?

Everybody is getting into the conversation. I would draw the analogy of the donor advise fund and the commercial folks going after that in the same way that I would if I can lean back on planned giving in 1987 when I first heard about it. That was my first year in college, and I got my first development job by accident at Michigan State University and found this profession that I fell in love with.

Back then, donors would be talking to a development professional. The development person or a volunteer would've asked them for a gift, and they might have said something like this. They might have said, "I really want to do this, I want to make this gift, but I don't have the cash for it. You know what stinks about it, is that I have this piece of property that if I could just sell it, it has value to me, but it has this huge basis. If I sell it, I take a bath on it. I'm going to be killed. If I could make that a revenue-generating property, but I can't because it's this thing."

Usually back then the development officer would say, "Oh gosh, that's terrible." Then they would go for another immediate cash gift. Then they would go back to the office and maybe tell an attorney there, an estate planning attorney, just maybe that something happened. They wouldn't do what all development officers do now, that say, "If I could show you a way to create a trust that would allow you to keep that property, and get full value of it, and when you pass we could get the asset."

Now, put ourselves 30 years ahead of time, now we have donors like the two stories in the article. There's Philip and Lauren, and then there's Jamie and Denise, who made a program related investment, a loan, to an organization without even being asked.

What they said was they got pitched, in Jamie's case, Jamie and Denise, they get pitched a clinic. Jamie and Denise were saying, "Look, they were very generous donors to the organization." They went into that meeting because they had made other commitments, and these aren't fake stories, these are real people. As a couple, they went in, and they were really well versed in development and so on. They've been asked, they've done leadership gifts.

They said they were only going to give a certain amount, and that was $50,000, that's a lot. Jamie and Denise are in the car saying, "No more. We love this group, but let's not fall in love again in here and do more than we can." Then they ended up, through a series of questions and a series of meetings, giving $250,000 loan.

They realized that there was a revenue stream attached so that they could loan them the money, shut the campaign down, and they could wait seven to ten years for their payback. The group didn't say, "Could we get a $250,000 loan?" The group was asking for the gift.

Again, this isn't going to work for everybody, but it's analogous. That's why I said in the article that planned giving or impact investing in the program officer, program professional realm in 2017 is like what planned giving looked like in 1987.

That's why 30 years later, here's this huge potential that development officers need to know that donors want, just like they want charitable gift annuities.

Romy: I noticed the theme of both of these stories; I am full agreement with donors, is that both of these couples were very intentional about attempting to solve and help the organization they're trying to fund. What ended up happening is their capital ends up recycling to catalyze something else in the future. This is very attractive to donors, this idea.

Doug Stewart: It is. I love that you said that, in terms of the recycling. I sometimes think when people, especially development professionals, I've shared this article with two of my friends who happen to lead two very large university development offices. I met with them before like, "Gosh, why don't you guys do this?" They're like, "It's complicated, we're worried about it cannibalizing our annual donors. If they start investing, will they give?"

There's some concerns about that, and I say, "Man, that's the same thing we were saying about planned giving and now look." Then when others think about impact investing, they think about the high flying market-rate side of it, more like the mission-related investing.

If we were to define these things, program-related investments being concessionary returns so that if you lose it, you can mark it off as a gift. On the market side, you lose it; you lose it. When you're going for market returns, this article talking to development professionals is about the concessionary side.

It won't be for everyone. A women's shelter that's taking in women from domestic abuse and all these things that we're hearing so much more about nowadays, they may not have an opportunity for this. When we say the donor, we are talking about donors who are, to your point, they want to do this. Many of them are direct cash donors in addition.

Our first PRI was to an organization that the family had just made ... When I say our, I mean the foundation that I serve. The first PRI that the foundation I served made was to a group that the family had just given a half million dollars to. Then they said, "Would you be interested in a loan for another 200? For seven years, use the money to do exactly what you were doing here, and then give it back to us."

I'm probably talking too much, but I have one other example where this makes sense.

Romy: No, I love it.

Doug Stewart: You said the money recycling, one of the things that we also know about investors, in the truest sense of the word, meaning an actual financial investor; they always have a cash account. There's for cash flow purposes; there's this certain amount of cash sitting there.

Foundations have that that have endowments; individuals have it. Imagine you live in a small town, and your small town gets a federal grant for a certain program, it's a violence prevention program. Like any good federal grant, you have to do it, and then they pay you.

Your small town now can't do it, and because of the for-impact organizations that they're using, don't have the cash flow to front it. Everybody says, "Darn." Then they "Leave money on the table." An investor or a donor who has a cash account and has X sitting in there that might be a small portion, and all they're doing is parking their cash in a different place. It's a federal grant.

They're just helping with cash flow, 0 interest. Then that money, instead of sitting in Goliath National Bank, just to use a funny. Instead of sitting in Goliath National Bank, it actually creates an impact, and then the money comes back. You're not even paying rent on it, how much are you getting in your cash account?

Romy: Right, some are negative.

Doug Stewart: Yeah, some are negative. That's just to your point, that's not even recycling, that's almost like putting something to use that wasn't going to be used, it's just going to sit there.

Romy: That's right; it's queuing up an asset. By queuing the asset and putting it into the right puzzle for a season, it multiplies the already existing puzzle.

Doug Stewart: That's a great way to put it.

Romy: I think that you quote in this, you talk about almost the fear of that "It's too complicated" that program development officers face. They think, "Oh man, I'm going to need to be huge or get a lot of education for this." It really isn't that complicated. Would you speak to that a little bit?

Doug Stewart: Yeah. I think you mentioned, and we talked a little bit about, that this won't be for every group.

Romy: Right.

Doug Stewart: Again, just to focus our conversation and I love the work that you all are doing around social enterprise, which is a broad definition and it's really important. Sometimes, a social enterprise might be organized as a limited liability company; it could be a for-profit, it could be a for-impact. They're going for social enterprise.

Douglas: They care about the legal, just depending on what they're trying to achieve. In this conversation primarily, because we're talking about development officers and development professionals. We're really talking about for impact organizations, so, to take that as the basis, cause, yeah, this is relatively complicated. But, for the development officer, or professional, it should be pretty straightforward.

Uses of capital; do we have, you know, in business there are weighted average costs of capital where people are like "Well, we're going to borrow this money, because we're gonna make so much more than the 7% we'd have to pay for it, so that's our cost of capital, 7%. Or, we have treasury dollars, which only costs us our next best project, and we'll put that there." Usually, in for impact organizations, they have two sources of capital; new donors, or, our retained earnings. We might have some problematic revenue coming in fee for service, but the regular organization that most of us have worked for, they have new donations coming in, or they have reserve. Usually, the reserve isn't enough for you to borrow from yourself.

Romy: Right.

Douglas: And, so, when we try to do projects, even if they have a payback, like a new piece of equipment that's going to save us money down the road, we end up having to either, raise money for it, or borrow from ourself. Well, what if that piece of equipment increased your efficiency around something, where you would actually save money? If you borrow that money from a donor at 0%, then it doesn't reduce your working capital; it can still do it. So I'll give an example, and this one I'll have to go to the healthcare field, cause it's where I spent most of my time raising money, and it is complicated, and I can hear my colleagues in the development field, and healthcare saying "it's not that simple!", but here's a relatively simple thought example.

If you are a for impact healthcare clinic, and you need a piece of equipment that you know you're going to make revenue on, cause you've got Medicaid reimbursements. You've got other things going on. Maybe it's a dental clinic for people who can't afford dental care; and you know there's a return. At some point, you're going to break even on that, but you don't raise the money so you can get the equipment. And that's hard to raise that money sometimes, but if you can get a donor to lend you that money for two years, or for three years, because they have a mission that's related to yours, and they're willing to let you borrow that money.

Now you can raise the money for something else when you have that revenue stream coming back. Who else does that? The for-profits do that all the time. They have money, that instead of putting it into that piece of equipment, they borrow it, because, in that case, it's less ex... they're getting more revenue than they are paying interest, right? So, I hope that wasn't too complicated, I don't think it is, but it's sort of ... if you were going to borrow this money, or if you could, and you could use that fundraising for something else, and borrow that, now you have more capital, and you just have a different source.

Romy: I would echo that, having spent 23 years in the traditional financial industry, that it is a different bucket of money. I want to encourage those out there thinking about ... You mentioned [inaudible 00:23:16] one's source for another ... We find when you invite a perspective donor to the table to participate in something like you just discussed. Hey, gosh, I can lend you this money for the piece of equipment to help make you more sustainable. You need to keep in mind that donors are very interested in the health of your organization, they want to see you keep going, but it is definitely a different bucket of money in their mind and with the financial advisors.

Romy: Yeah, let's take a side step with the officer-

Douglas: So two things that you've heard me say, and Romy, you and I have talked about this a little bit, and I appreciate you giving me ... and I should probably keep this to under thirty seconds on your very important podcast, and people who are listening. So, two things. One is nonprofit, and the other is officer.

The word nonprofit, a handful of us have been going after, for a long time, and even Bill Drayton, who started the Ashoka Fellowships, has been going after the word nonprofit for a while. I just, sorta, want to be very clear, this is not something that started with us. Then the officer was something very recent, so, briefly, I just don't believe that this sector ... alright, put it in the positive ... I believe this sector deserves a name that truly reflects what it is, as opposed to simply saying what it's not.

While many people think that profit is bad, such that you could say nonprofit is good, and many people say that nonprofit has a lot of positive connotations, I'd say I agree with both of those things, in pieces and parts. Not all, cause I think profit actually can be a very good thing.

I grew up in a family of academics, so I lived off the for impact sector my whole life, but friends who have fa ... parents, and so on that were working for GM, and so forth. You know, that's for profit, so that funded their education. Some are fine, but I really think that we shouldn't simply be defined by what we're not. For me, I want to be for something, and a good friend of mine, Ron Cagan ... Another good friend, Shirley Stancato. Ron runs the Detroit Zoo. Shirley runs New Detroit. We got together. We're like, well, should it be social impact, and they were like, well Ron said, "Remember, there's an environment in it too."

Romy: Yeah.

Douglas: Right? He's like ... we said "Okay. For impact, so we would have a name like our sister sector, for impact."

And I know I'm over my thirty seconds, and we have to get to the officer-

Romy: No, no-

Douglas: But let me-

Romy: That's fine.

Douglas: Let me just say it's interesting, but I've been floating that to some of my friends that work in commercial, private commercial space; they'll say "Hey, some of the best businesses we know, were designed to solve a problem." I said, "You're absolutely right." They're like, "We make an impact too!", and I said, "that's awesome, report it.", because you know what? Our sector makes a profit too. I mean, what do you think some of these healthcare systems that are C3s, that have 7 billion dollars in endowment; that's retained earnings. Really, if we had to argue, we'd have to call ourselves the non-owner's equity sector. Right?

Romy: [crosstalk 00:27:57]

Douglas: And that sucks. It's like what are we for? If you make an impact, report it. Companies like Strategic Staffing Solutions, they're a really impactful company, and they're starting to report what they're doing from an impact standpoint. That's the pitch on for impact. We never ... we, just the group that agrees, and not all my even ... my own team agrees with this, by the way, but that's obviously for profit, instead of non profit.

Romy: And you use the term C3, which is an abbreviation for the 501 C3-

Douglas: That's right-

Romy: For those that might not be in the U.S., yeah.

Douglas: Yeah. Good point.

Romy: That's our IRS code.

Douglas: And for those that are listening from other countries, we had ... I pitched this in front of a group of folks, who were not simply from the U.S., and including Israel, and a couple of countries in Africa, South Africa, Zambia, and Uganda, and I pitched this, and they were like, "You know, why do you in the states, always have to come up with a new name for something. Why don't you use ours? NGO?"

I was like,"Non-Governmental Organizations?" That was the reason why they're not. Now that helps me do some work in Lusaka, Zambia. It's clear when there's an NGO ten years ago, cause you could say "This isn't the government," and they'd be like, "Oh, I get it." But now, even Lusaka and the outer land provinces are becoming more commercial. I think the NGO is going to start losing its pull in other countries, because it'll be like, okay, well the commercial sector is also nongovernmental. But anyways, NGO is still better than nonprofit to me.

Romy: I was thinking about the nation ... the NGO, cause we've done some work globally as well. It gets tricky because sometimes they're receiving funding from their government. So it gets all ... it's half, or nothing, or the other. You know? It's like-

Douglas: It is-

Romy: I like your for impact-

Douglas: It is.

Romy: How about the officer? We've had some last behind the scenes about this officer. I love this story you're about to tell about your revelation about the word officer.

Doug: ... You that are listening. This is something, our work, we very much like many social justice minded, and equity-minded social change makers, we want to listen to the people inside the issues as much as we can. The people who have dedicated their lives to it, the people who have lived experience with it and the people who live inside it and deal with it every day.

And so, to make a nine-year story much shorter than that, the family has always had this ethos to listen closely. We've done, to use some shorthand, we've done some co-design work with our partners in a neighborhood called Brightmoor here in Detroit, Northwest Detroit.

For those that haven't heard of co-design, if you google co-design in Stanford you'll run into a lot of stuff around co-design. It's a fancy word to say that you're going to talk to the people who use it first and then design it.

We had been involved in early childhood for a long time, and we were working with a set of women who live in poverty, some of them, who were running small businesses taking care of kids. After handfuls of years where we were asking them what they were interested in and we were showing them grant proposals saying, "Do you think this is going to work?" before we would fund it.

We said we should start with them. First, they've worked with these for-impact organizations long enough. Let's say that we're going to sit down with them and say "What do you want?" Then we'll find the impact organizations that do it, instead of bringing them grant proposals from impact orgs and saying, "What do you think?".

The end of that process, fast forward, is that the woman who did that work with us and facilitated it, she was such an amazing resource that when we asked the rest of the women, "From this process, what would you like most? The biggest outcome?" They said, "We want more time with Cam." Cam was the woman who ran it, so we hired Cam as what we call the Network Officer.

So here's the reason why officer is a problem for us now. Cam's doing work in the neighborhood, and the women pull her aside and say, "Tell us about your title. Tell us why you're called that". She said, "Oh, well a network is ..." and she starts describing a network.

They're like, "No, no, no, no. We know what a network is, we get that. Why are you called an officer?" She said, "Well, you know, Chief Executive Officer, Chief Operating Officer, it's just a term that's used in foundation-speak, and I guess it's in the corporate world and so forth." They're like, "But do you understand." They were kind of holding her hand in a way saying, "You're from where we're from."

She said, this is one particular provider, she said, "You and I both have to train our sons how to act in front of police officers. I'm telling my son that when he gets pulled over by a police officer, that he has to start saying 'sir.' That he has to code-switch to 'whatever you want, sir.'" She said, "What I'm asking you is, am I supposed to comply with you? Is that what the Fisher family is trying to tell us?" It was like, "Okay, that's a break."

Here we are, working in a community where mothers and fathers and aunties and grandmothers have to train their children how to act in front of police officers, or parole officers, or child protective officers. Here's a program officer walking in which many times don't look like they do. That was a break.

We asked them, so I could stop there, but they did help us address if you want hear that real quick.

Romy: Yeah, I do.

Doug: We said, "Oh my god." We're like, "Oh my god, no my title is executive director, not chief executive officer." But that doesn't matter; we have program officers, associate program officers, senior program, et cetera. There's only seven of us, so we have one of a couple of those and two of a couple others. In any event, so we said, "Well why don't we ask them what they want their title to be then?"

Cam went back; they came up with 23 choices. They had two focus groups, if not three. I think Cam had one around her dinner table, but these were real focus groups. Took the 23, whittled it down to three and then instead of picking one, they came back to us and said, "Here are the top three. We know that you need to code-switch with us just like we have to code-switch with you when we're in our communities. So look, we love all three of these. You take these and go back to your mostly white privileged world" with all sorts of respect.

Look we've had hard conversations. They said, "You choose the one that's going to resonate the most with your peers because we'll take any one of these three." They knocked out 20 other alternatives and said this, so the title that will stick is network partner.

Romy: Partner.

Doug: We'll start, and we never call people grantees because most of the time people only call themselves grantees when a foundation is there. For all the money I raised from foundations I never called myself a "so-and-so grantee," unless I was in their offices.

We're going to change our titles from program officer to program partner. We still haven't figured out how to do the gradations of that, like are you an associate partner? Then Director instead of Director of Programs, because that doesn't make sense anyways for us, like Director of Partnerships.

They'll partner with funders; I know that sometimes that sounds like fundraising, but it's actually really underscoring what our relationships are with our partnerships. We just happen to have the financial resource, they have the human resource, they have parts of the intellectual resource. It's a lot longer than I thought, I'm sorry.

Romy: No, I feel like this is really important because unless we, in the broader scope if we lift ourselves up to more of a big macro view; impact investing works when there's thoughtful observation going on, a little bit of a jump down the pride ladder.

Doug: Yeah, nice way to put it.

Romy: Pride's a stinker; it'll get us all in trouble. I notice that if we humble ourselves and we really understand impact investing works best if we can just stop and pay attention to things like that, that many would overlook. I personally want to thank you for taking that seriously and doing something about it. That's why you're one of the change makers.

Doug: Can I just share one last thing? I don't know if we're wrapping up, but there's a quote from a woman that I learned something dramatic from, that where this comes from. It can go right back to impact investing and the words there.

I was sitting with Mrs. Fisher, Marjorie, the other namesake of the foundation I'm lucky to serve. I'm sitting with her daughter Julie, sitting at her bedside while she was going through some thank you notes that she was receiving, that she had received from a handful of families whose children she supported through high school and college.

There was a group called Take Stock in Children in Florida that is an amazing group. They were the ones that actually did the work, Mrs. Fisher provided the resources. She was looking through a thank you note, and under her breath she said, and I'll never forget this.

For the years that I've spent at donor's sides, when they've had breakthroughs and when they've cried about the impact that they've made, or they've been excited about the legacy they've extended, I've never heard a donor say this before. She said, under her breath while looking at a note, "I will never be able to give enough to make up for how grateful I am for these families who have allowed me into their lives."

Romy: Wow.

Doug: Right, I just want to say it one more time, so you don't have to back up the podcast or whatever. I needed to hear that because I was like, "What?"

Romy: That's so touching.

Doug: Yeah, she said, "I will never" ... This is a woman who had everything, as people would say. What she was looking for was to make an impact, she couldn't do it alone. She had the humility to know; this is Marjorie Fisher, she had the humility to know that she would never be able to give enough to make up for how grateful she felt for the families who allowed her into their lives.

When we go back to impact investing, and we go back to all this, the investors who champion a three X, two X, one X, zero X, you notice how it's smaller there, not bigger; that they need to be thanking the people who do this work every day. They need to be thanking the families that go to the meetings, for whatever the intervention is. That's what we call it; they don't call it an intervention. They call it, "This is justice."

Maybe someday two things will happen with impact investing. One thing is, is that we know that all investing has an impact. It can be positive or negative, negative we just call it an externality and then people don't pay for that. Imagine if all investing took in the full impact of it, positive, negative, and we just called it investing. Some of it has a positive impact, some of it doesn't.

Then we have for-impact for-profits. We could actually see it; it's like, "Report it guys." You know why they don't report it? They're just not disciplined enough. The for-profits, they just don't have enough discipline to measure their impact. That's what they used to say about us.

Anyways, it's the humility. I want to share that quote because I wanted you to hear it, Romy. You're a partner of ours; you're actually involved in a couple of our investments. That's part of our ethos, and I don't get to share that story very often and that quote. I have written about it, and I can give you a link to it.

That's the kind of humility then that underscores all of this and also recognizes the importance of the development officer in this mix. They're not begging for money; they're not taking people's money. They're developing opportunities for people to change the world and they need to look at this impact investing work and see themselves in it.

Romy: Yes, absolutely. That's a great place to close out for now. I want to thank you. I'd like to come back and periodically check in with you on your observations as a regular guest if you're willing.

Doug: Sure. Only if you see it worthy. You should talk about what those are before we go on.

Romy: Right.

Doug: I'm happy to, very kind.

Romy: Let me get one more, and I'm going to go back and insert this. Doug, what would be a strategy that you would give to a program officer who says, "Gosh, what do I say to my donor when they say, "Why wasn't I offered the opportunity to fund the equipment? Are you using my donation to pay back the other guy?"

There's a little bit of nerves there. Really, in my mind, it's just a matter of language, of how you set that expectation. Since this article is really attempting to start to encourage the program development folks, could you speak into that? I know we didn't ask that ahead of time, but I feel like it's real for them.

Doug: I think transparency in fundraising and development is really important. The professionals who love it as much as I do feel the same way. I think this is a new body of work, right? If a donor were to say, "Why didn't I get that payback? Why didn't I?"

Those are the kinds of questions that people were asking when the charitable gift annuity was created. It was like, "Why didn't I give you the money and then create an annuity that came back to me? Why didn't you talk to me about that?" I just gave it directly. If we create a menu of opportunities for donors, and this is what development professionals do so well, those that are raising the money.

Be clear about what capital we need and why so that, "Yeah, for this equipment we already raised," let's just make it simple, a $50,000 piece of equipment. If they've already got $25,000 of donors for it, and then another stepped up and said, "I'll give you the other $25, but I want mine back."

They should go talk to the other donors and tell them that, "We have a chance to do it this way, are you comfortable?", so that they're not in the same deal. If all those other donors say, "We want to loan it too," then you have to figure out how you're going to do that.

I would be clear on the front end and say, this is like with Jamie and Denise, "This is a clinic that within seven years, it will pay back what we put into it and we'll start making margin." Okay, that means somebody could loan the money to it. I think they just have to be clear on the front end.

One of the things we shy away in the for-impact space is, "Oh my gosh, we're going to make money on that. We're going to get revenue back." The Catholic nuns that started a lot of these healthcare institutions would say, "No margin, no mission."

Romy: That's right.

Doug: I'm not saying that everything has a margin, but if you have something that does, that could pay it back, then let's just be clear and let's be really up front with our donors about it on the front end and not worry about it cannibalizing. Just say, "We have all these opportunities, you should decide what's best for you."

Romy: Right. Then backing that up one step further, for comfort for the program developer officer is understanding what is the revenue model around that piece of equipment or that project so that they know the math. When discussing it with a donor, they can make the argument, "Gosh, I won't have to keep coming back and asking you for this if you'll help me turn this into something that's an asset instead of a liability."

Doug: I agree.

Romy: Thank you. Is there anything else that you want to add on? This was really good.

Doug: I'm glad you like it.

Romy: Anything else we might have missed? I'll piece it in where it fits.

Doug: I think that one of the things that I would want to tell a development or a fundraiser who reads this article is to realize the important role that they play in the for-impact sector. That they are not simply tools of the administration to raise money. That they stand between people who want to change the world, who have the capability to get it done, and the insights from the people who live it, and the people who want to change the world in that same way but they don't have the capability, they have the financial resources.

When they hear impact investing, I want them to really hear the last paragraph of this article, which is some people think impact investing is going to change the world because they investment people are going to grab hold of it, and that's true. I actually think that this is going to be more true; that impact investing is going to change the world because development professionals are going to grab a hold of this for impact organizations.

They're going to accelerate it, and they're going to introduce people that, "Oh, I'll loan that portion and I'm going to give you more." Just like you said about those 400 investors that started giving more. I think it will be the development officers in the for-impacts that are going to accelerate this far faster than the for-profit. That's what I would want them to hear.

Well, that was very informative. As I mentioned, jump into our show notes for lots of links to various articles and mentioned associations. Now, let’s see what we have for you today in the form of a song to end this episode. Oh my, one of my new favorite songs, here is the artist group, Infatuations, and their song ’Let it Ride’. Thanks to our friends at Assemble Sound for the song!
Until next time, keep those bonfires burning….

 

Links

Website for Douglas Bitonti Stewart

Link to the article Impact Investing and the Development Professional: Learning to Ride the Wave

Twitter page

Facebook page

National Center for Family Philanthropy

Linkedin

Michigan Foundations

Advancing Philanthropy Magazine

Mission Investors Exchange

Jewish Funders Network

MaxMFisher.org

 

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