Jumper

Diane Ragsdale on what the arts do and why

Change in the arts sector. Can we speed it up or must we wait it out?

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EvolveFish

 

Devon Smith has written a smart, provocative post on a debate she engaged in at the recent Americans for the Arts Conference in Nashville. It’s called We Should Allow Failing Arts Organizations to Die and it has lit up the arts blogosphere, Twitter, and Facebook the past few days. So much so that she has added a second post responding to the internet comments. This topic is close to my heart. In 2009 I was on a panel at the Grantmakers in the Arts Conference alled Graceful Exits,What Can Funders Do When It’s Time to Pull the Plug. In 2011 I was interviewing Rocco when he made his now infamous supply and demand comment. And over the past few years I’ve written four Jumper posts on the subject.***

While one could argue that I’ve had more than my say on the topic, Devon’s terrific post, along with a recent academic article recommended by one of my PhD advisors, has inspired me out of an extended hiatus from Jumper (during which I’ve been working on my dissertation). I thought I would reflect on the following issues related to ossified organizations that fail to change or die: (1) why organizations arise in the first place; (2) why inertia sets in; and (3) how organizational change happens.

The academic article that I’m referencing is called Structural Inertia and Organizational Change and it is by Mike T. Hannan and John Freeman (who work in a realm of the social sciences known as organizational ecology).

Why organizations arise in the first place:

One of the many provocative points that Devon makes is that a lot of what counts as culture, captures our interest and imagination, and gives meaning to our lives does not, necessarily require an arts organization to be created or delivered. She writes:

I don’t have the stats to support this, but for every hour of “traditional” nonprofit arts that a consumer experiences this year, they’ll spend 20 or 30 times times that experiencing “nontraditional” arts and culture. Those experiences that reveal or question our humanity. That enable us to see the world and each other in a new light. Those experiences that delight our mind and our senses. That teach us about other cultures and expand our capacity for imagination. Because for me, those “nontraditional” experiences include going to a folk music concert, funding a poetry book on Kickstarter, appreciating the aesthetic design of an especially beautiful video game, the art of a pulling a great shot of espresso, and the craft of a great pair of raw denim jeans. All things that I’ve done these past 3 days in Nashville. And none of those experience required an arts organization to support them.

Many of them did, however, require organizations (video game companies, coffee houses, fashion houses and manufacturers, etc.). This raises a couple interesting questions. Why do organizations arise, generally? And why do we see a sector made up of arts organizations more so than a sector made up of artist collectives that are not permanently structured into organizational form?

If I asked a room of arts conference attendees this question they would probably answer that you can only get grants if you are formed as an organization and this may, indeed, be a significant part of the story. At the heart of it, organizations are means by which a collective of individuals can pursue common goals and also aggregate resources. While economists tend to explain the emergence of organizations in terms of efficiency organizational ecologists looks at it differently. They argue that organizations are favored over loose collectives because they are reliable (i.e., they can reproduce a given product at a certain level of quality) and they are accountable (i.e., they are able to rationalize their decisions and account for their actions to customers, investors, governments, et cetera).

The nonprofit organizational form, in particular, was not heavily utilized in the US until the mid-twentieth century when it became authorized (the IRS began to approve its use among arts organizations), legitimate (donors and others had begun to recognize arts organizations as having a valid educational or charitable social purpose, worthy of contributions), and materially beneficial (there were actually sources of funding that opened up that made the nonprofit form preferable to the LLC or other forms).

Why inertia sets in:

In the article mentioned above, Hannan and Freeman make the case that structural inertia (meaning a failure to change, or change fast enough, in response to changes in the environment) is an outcome of a system that tends to select organizations (over unincorporated collectives) and certain kinds of organizations (those perceived as reliable and accountable) over others.

In the arts sector, with the emergence of grants from government agencies and funders came the emergence of eligibility requirements: the presence of managerial staff, minimum number of years in existence, minimum number of weeks of programming per year, track record of producing good works as demonstrated by positive reviews, a minimum level of annual operating budget, stable operations (lack of turnover), a persuasive mission statement, clear organizational goals, and a long-range plan. These are basically signs of reliability and accountability.

And it stands to reason that within a given field it is often the oldest organizations that are perceived to be most reliable and accountable. So funding tends to gravitate toward them–funding which enables them in many cases to build buildings or hire staff, which further contribute to their structural inertia.

Not only does structural inertia increase with age and size but transformation is a gamble for organizations as it may jeopardize their perceived reliability and accountability. Big change seems to have paid off pretty well for Diane Paulus at American Repertory Theatre, but not so well at New York City Opera, where attempts to reinvent in the final years (when the organization was already in a weakened state financially) resulted in a loss of confidence among stakeholders.

For this reason, large, old under-performing organizations often resist transformation. This is the idea at the heart of the book, Permanently Failing Organizations, in which the authors essentially ask why low-performing organizations persist. They answer that it’s largely due to the fact that those who rely upon the organization for a livelihood and also have the power to make decisions (i.e., managers) keep organizations alive (so they can continue to earn a living) but fail to make necessary changes that might lead to higher performance because doing so is a gamble that could result in outright failure.

Other internal factors that contribute to structural intertia are sunk costs; political alliances; and the tendency for precedents (things that worked once) to become norms (the way things are done around here).

There’s much more I could write as it’s a complex subject but these are the key points that seem relevant for the current conversation.

How organizational change happens:

So if inertia is a consequence of these external and internal factors, and seems almost inevitable, how does change happen?

I’m oversimplifying things, but there are basically three major points of view on this: individual organizations can make conscious decisions to adapt to their environments (rational adaptation); individual organizations do change but often such change is random, rather than in rational response to goals or the external environment (random transformation); and that change tends to happen at the population level, rather than at the individual organization level. Meaning, change happens with the death of some organizations and their replacement by those with different traits (more suitable or favored in the current environment).

The last perspective is that of population ecology and the one advanced by Hannan and Freeman.

While these are divergent points of view on organizational change it is also fair to say that all three types of change can be observed. Those who advance the idea of population ecology, for instance, also recognize that there are types of organizations, and points in the life cycles of organizations, when organizations can and do change individually. A population ecology perspective would also suggest, however, that this type of change can be challenging and risky (as noted above).

So if I put this all together and reflect on Devon’s post, here’s the picture:

  • Generally speaking, organizations are favored over those entities that are not organized.
  • Selection systems also tend to favor organizations that are older as they are perceived to be both more reliable and accountable.
  • Structural inertia is a consequence of both this selection process (which favors older organizations) but other internal factors.
  • While it is possible for arts organizations to change, generally speaking change (particularly in attributes of an organization that are deeply tied to identity) is likely to be resisted. Why? Because of the expectations of funders, donors, and audiences for reliability and accountability, because of investments in large concrete venues, because managers and musicians want to keep their jobs, because board members want to protect their investments and social standing, and because the general lack of risk capital in the sector makes it less likely that any change that is attempted will be successful (and more likely that the organization will fail).
  • Thus, it is perhaps more likely that change in the arts sector will happen at the population level, with the death of old forms and the birth of new ones.

Can we facilitate or speed up the death of old forms?

The short answer, from what I’ve read, is that permanently failing organizations are hard to kill. Having said that, I do wonder whether there are changes that could be made at the field level that might influence the pace of evolution in the sector.

Here are a few ideas:

(1)    Shift grants away from large organizations to midsized and smaller ones: If you are an avid reader of the annual Grantmakers in the Arts funding reports you will have noticed a couple stagnant trends the past ten years: the “average” arts grant is (and has been for some time now) around $25,000 per year and the majority of contributed income tends to flow to the largest organizations in the sector. When I was still at Mellon I began to wonder whether the arts sector would look different today if (over the past 30 years) arts organizations with budgets over a certain threshold (say $10 million for argument’s sake) had not been eligible for grants from government agencies or foundations.

The rationale for such a norm in the arts sector is that if an arts organization has been able to grow its annual operating budget to $10 million (perhaps larger in some disciplines) it has most likely done so either through increased earned revenues or individual contributions. This leads me to a normative proposition: organizations that have the capacity and stature to attract financially and socially elite board members, large individual contributions, corporate sponsors, or large levels of earned income should cease to be the recipients of grants from government agencies and private foundations. Instead, such funding should be channeled to organizations that do not yet have the stature or size to garner such support from their communities or whose mission prohibits earning large revenues.

If such a threshold (as I’m proposing) were normalized then donors would not interpret the loss of NEA and foundation grants, for instance, as a demerit or loss of legitimacy (which is often the rationale for maintaining tiny NEA grants to big organizations); they would see such as loss as a natural consequence of growth. Funds redistributed to smaller organizations could help to encourage the scaling of artistic innovations and the development of new forms of organization (which often fail to gain traction because they are unable to capture significant grants). And in the long run, perhaps such a rule would also act as a counterweight to the general incentive toward growth that is embedded in the system. How many organizations might cap their growth at the $5-$10 million level if such a norm were to be enacted?

(2)    Taxing the assets of the big and redistributing in the form of income to the small: I’ve just started Pikkety’s Capital in the Twenty-First Century and so am thinking quite a bit about assets versus income, the problem of inequality, and (related to this post) how a small number of organizations in the arts sector accumulate signicant assets while the rest of the sector is living in relative poverty. In the nonprofit arts sector, in many states, 501c3 organizations are freed from the burdens of both property tax and income tax. What if a property tax on arts facilities were instituted, paid to the local authority, and then redistributed in the form of grants to organizations that do not own buildings but do pay rents. As a side benefit such a shift might provide a nice disincentive for continued facility expansion in an already overbuilt arts sector.

(3)    Term limits in most organizations: What if the following positions were all limited to 7 years: artistic leaders (once the organizational founder has left), managing/executive leaders (once the organizational founder has left), board members, foundation program officers, and government agency program directors? The benefits of term limits are not only the opportunity for a fresh perspective in the organization but also an opportunity for “gates” in the system to open to those not favored under previous regimes. Funders and artistic directors amass considerable power (whether by design or not) and term limits are a way of dealing with that inevitability. This is a sensitive proposition (particularly given that not many people working in arts organizations have pensions); but if we are resistant to it I think it is important to put on the table the reasons why, beyond job security (which is valid, but may not be a sufficient reason for avoiding term limits).

***

So after thinking through these options, and possible reactions to them, it occurred to me that there is another option.

We could wait out the change that is coming.

Population ecology theory tells us not only that change often happens at the population level (rather than at the individual organizational level) but also that it often takes a long time.

So here’s an alternative vision.

There will continue to be the occasional deaths (and I suspect they will increase over the next 15-20 years) and new organizations will continue to be born. And some of those new organizations will have different traits–traits potentially more suitable for the 21st century. There is and will continue to be turnover at foundations and government agencies. There will also be an inter-generational transfer of wealth. New people—with new perspectives and views on the world–will be hired to run organizations, or will serve as grants managers and board members, or will have significant personal resources to invest in the sector. Some (maybe many) will see the merits in new organizations that are cropping up and will choose to redirect money to them. Dynamic leaders running these younger arts organizations will garner attention and legitimacy and either their organizations will grow in stature and size, or they will be hired to bring their values, ideas, principles, and new modes of operating to larger organizations already in existence.

It wouldn’t be entirely smooth and it wouldn’t be fast. There would be failures, tragic deaths, and some zombies would go on stalking the landscape. But change would happen.

So am I suggesting we just wait it out?

While I tend to be in favor of making structural changes to influence both the direction and the pace of change (I’d love to see all three of the ideas above explored and debated) I also recognize how difficult such changes (and those Devon suggests) would be in reality.

Waiting it out may be the only realistic option.

Does this depress me?

Not really–in large part because I have tremendous faith in the younger leaders that I see coming up through the ranks of larger institutions, or leading their own enterprises, or stepping into influential policy and funding positions. Last week I gave a talk on Civic Leadership for the fellows of the renowned Clore Leadership Programme in the UK. I was utterly impressed by the work these fellows are doing, by their deep thinking, and by their energy and courage. I see that young leaders have (in spades) the motivation and desire, networks, and capacity to potentially lead the changes that are needed. Smart boards and organizations are already investing in these young leaders (and young, in my mind, ranges from 25-45) and implementing their ideas.

In the meantime, I think that Devon has given us such great food for thought.

We are all accountable for the shape of our sector. 

Whenever a permanently failing organization is allowed to continue cranking out mediocre programming while capturing precious sector resources it should trouble us. I imagine that many of us recognize these organizations in our midst. Some of us shrug our shoulders and some of us blog about them in the abstract. But perhaps these are cowardly moves. It’s easy to criticize in the abstract and it’s easy to shrug off truly discouraging developments in organizations as inevitable. I’ve been guilty of both.

Calling out the zombies (in the blogosphere, in any event) seems mean and destructive and I’m not sure it would lead to any positive developments.

Perhaps a better route is to ignore them entirely, trust that they will die or change eventually, and (as Devon suggests) turn our attention and channel our resources to the those that are knocking our socks off. I think if foundations, government agencies, corporate sponsors, high profile artists and arts leaders, traditional arts media, bloggers, and influential board members led the way, and shifted their attention and resources, they would have tremendous influence on others.

And such a shift doesn’t have to happen en mass.

One person at a time will work, too.

*** Previous Jumper posts related to this topic: 

 

 

 

 

 

 

On organizations evolving: when short-term coping mechanisms become the new way of doing business

icebergsA couple weeks ago, one of my favorite arts bloggers, Andrew Taylor (a/k/a The Artful Manager) wrote a post whose title conveys a pretty strong thesis: Organizations don’t evolve; they cope.  While I share Andrew’s skepticism of the field’s use of natural world metaphors (ecosystem, ecology, evolve, adapt, sustainability, etc.) it’s not because I think the metaphors don’t apply (within limits); it’s because I think we sometimes misapply them.

Andrew begins his analysis with a comparison between individual organizations and individual organisms, writing:

We’re calling on existing organizations to evolve to the new environment, as living organisms evolve to theirs. Only, individual organisms don’t evolve. They only cope. So, we can tell a nonprofit corporate organization to evolve just as effectively as we can tell a fish to grow opposable thumbs. Its traits and tendencies were inherited at birth. It can adjust its tendencies, it can retrain its reflexes, but it’s still a nonprofit corporate organization, even if it can do new tricks.

He then rightly points out a couple paragraphs later that there are differences between an organization and a fish:

An organization is a bundle of people, things, processes, and traditions, bound by contracts and covenants, and restricted in its operation by laws, codes, and norms. A fish is, well, a fish.

The distinctions that Andrew makes between an organization and a fish are critical; indeed, it is these very distinctions that would seem to make it possible for an organization to evolve and impossible for a fish to do so.

Moreover, I would argue that (legally constraining, in principle, as the form may be) the nonprofit corporation has demonstrated that it can be rather easily manipulated to ends (goals) other than the (educational or charitable) ones which any given 501c3 organization is presumably formed to pursue. In other words, where there’s a will to evolve, there seems to be a way.

***

Organizations are socially-constructed systems with goals, presumed to be shaped by the contexts in which they are established. Typically, variations in organizations have been perceived to come about primarily through the deaths of old forms and the births of new ones. With the birth of new organizations, variations may be introduced, some of which will be retained in the population.

The introduction of the nonprofit form in theater is a nice example. In the first half of the twentieth century it was relatively rare to find a professional, nonprofit theater company in the US. With the emergence of funding from the Ford Foundation, and later the NEA, the nonprofit form became (in the words of Arena Stage founder, Zelda Fichandler) the apava for resident theaters across the US. In a 2011 talk, she remarked:

There’s an expressive word, I believe it’s Sanskrit – and the word is apava – that translates as “the effective means to make a vision concrete” or workable or real. Our apava, strangely enough, turned out to be the nonprofit corporation. Some of us might take that fact for granted, but we shouldn’t. It’s the basic reality of our existence. Before nineteen hundred and fifty something, theatre was excluded from the benefits given to science, universities, charities, the church, opera, and maybe dance – but not theatre, because it made a profit. We knew that without the nonprofit blanket we could not exist, for it allows us to receive gifts and grants and to be free of taxes on tickets.

Beginning in the 1960s there was an exponential growth in the number of nonprofit theaters. Organizational ecologists would suggest this was a reflection of the legitimacy of the form over other forms and that this growth would continue until the population had reached its carrying capacity, and then it would begin to decline. The carrying capacity is the maximum population size that an environment can sustain indefinitely given available resources.

As an example of the growth and decline in a population, as part of HowlRound’s recent weekly series on Black Theater in the US, Sade Lythcott noted in her essay that “in the roughly ten-year span of the Black Arts Movement in New York alone (1965-1975), over two hundred black theaters emerged; today there are less than ten.” The decline in that population (not only in NYC but across the US) has been considered by some in the theater field to represent the struggle of black theaters to attain legitimacy, resources, support, meaning, etc: they were birthed in a certain context and as the environment around them shifted they were unable to compete and survive.

Likewise, it is rare these days to see a young contemporary choreographer form a permanent company in NYC with a large number of dancers on the payroll, or a resident theater company (in any city) formed with a permanent acting company.

And it’s not just certain forms of arts organization that are now harder to sustain; reading the “bracing” conclusion of the executive summary of the 2010 National Arts Index (as reported by Ben Davis), one wonders if we have reached the carrying capacity for the nonprofit form in the arts generally:

Given the profusion of underfunded organizations, the nonprofit model may have to be abandoned in favor of more experimental or market-oriented business models for the arts.

This is frequently how evolution in an organizational population is seen to occur: through the death, birth, and (importantly) growth of some organizations (and not others) in response to a shifting environment.

But as we have seen now and then, and as more recent research has theorized, it’s not only populations that can evolve. Individual organizations themselves can transform (sometimes dramatically, sometimes incrementally) and do. While a fish may not be able to grow a new central nervous system, an organization, in essence, can.

An organization can “unlearn” practices and beliefs and norms and strategies, and learn new ones. It can shift its “dominant logic.” One paper on this topic (Bettis & Prahalad, 1995 – The Dominant Logic: Retrospective and Perspective) asserts that this “unlearning” and “shift in logics” may be more likely to occur out of a period in which an organization experiences a high degree of instability. (Of course, this is not always the case: other possibilities arising from instability are that the organization will survive and revert back to the status quo, or simply fail entirely).

It’s not hard to identify arts organizations that have been transformed out of periods of duress. The Louisiana Philharmonic Orchestras is a musician-owned and –led orchestra that formed after the demise of the New Orleans Symphony. The fact that the name has changed is less important than the fact that many of the same people re-organized and re-formed with new goals and a different structure and relationship between management and musicians.

Or consider the new strategies introduced in the opera world when Peter Gelb traveled from Sony to the Metropolitan Opera (which was, at the time, struggling with declining audiences and financial challenges). Consider the way the HD broadcast adaptation, specifically, has begun to influence the creation, production, and distribution processes not only at the Met but in other organizations, as well, and has begun to change the relationship of audiences to the art form of opera.

Or look at how Diane Paulus has radically re-interpreted the mission of the American Repertory Theatre. She has changed the goals, relationships, identity, structure, and strategies of the organization in response to not only a changed “world” (i.e. larger societal context) but also changed expectations from ART’s “host,” Harvard University.

Of course, organizational evolution is rarely this dramatic. More often, it happens so slowly we don’t recognize it. Paulus did in one season what other theaters took two decades to enact.

We tend to talk about the arts and culture sector these days as though it is “stuck” – unable or unwilling to change – but it might also be useful to consider how the present state is a function of small adaptations (in structure, people, processes, culture) in response to a shifting environment and the persistence of some of those changes over time (i.e., those that were perceived to increase the chances of survival).

Evolution occurs both through adaptation and through the perpetuation of whatever is working well. In The Resilient Sector, Lester Salamon has suggested that we have been witnessing a long creep towards commercialism in the nonprofit sector in the US generally (not only in the arts), because this is, essentially, what the slings and arrows of the US system encourages.

With the lack of subsidies and increased competition for funding, what options exist for staying alive? Do an enhancement deal and produce a new musical; reduce production expenses and beef up the development and marketing staff; find a corporate sponsor and produce a sensational exhibition of some kind; hire a celebrity and charge $300 for tickets; avoid producing works that require a large number of actors or musicians or dancers and more than the standard amount of rehearsal time; replace an unknown work by an emerging playwright with last year’s Tony Award-winning work; or better yet, a revival of a well-known title by a household name.

These strike me as coping mechanisms. Tactics to enable short-term survival.

In this sense, I agree with Andrew. Organizations often adopt coping mechanisms in response to changes in the environment and uncertainty. However, sometimes a coping mechanism, perhaps because it’s working in the short-term, becomes a longer-term strategy. It gets re-framed as a process innovation and becomes a new way of doing business — a model for existing organizations, or new ones being formed, to replicate. Eventually, one adaptation can begin to have repercussions on the audience, the art, and the identity of not just one organization, but on an entire organizational field.

Some of these changes may strengthen nonprofits and their ability to realize their missions and goals. Some may not.

Therefore, from my perspective, the question is not whether or not organizations can (and thus should be expected to) evolve; they do evolve. The question is how, and in response to what?

***

BTW, closely related to this blog, I’ve endeavored to tackle the concept of sustainability in the arts in a recent talk that I’ve given in Minneapolis, Lyon, Salzburg, and Belfast. It’s called, “Holding Up the Arts. Can We Sustain What We’ve Created? Should We?” There is a permanent link in the sidebar “Stuff I’ve written”.

When does coaxing become coercing?

carrot-stickLast week I wrote a post on the efforts of foundations to encourage diversity (of various forms) in nonprofit arts organizations, in which I suggested that such efforts could be construed as a form of coercion. In particular, I discussed a new initiative at the Irvine Foundation and suggested that Irvine has been trying to “coax” its grantees into uncharted territory and “coerce” them into behavior that some are not ready or willing to adopt. In response to my post, Ted Russell at the Irvine Foundation tweeted the excellent question, “We’re coaxing. But when is that coercive?”

Yesterday, Barry Hessenius at Barry’s Blog wrote a post astutely synthesizing a few of the recent posts on this topic of “funding diversity” (including my own, for which I’m grateful) and offering his own thoughtful perspectives on several issues, including philanthropic coercion:

Individual organizations are less interested in systemic sector wide change, no matter how lofty the purpose or how much they may embrace the concept and agree with the goal.  It’s really not their job to do so.

But, it is the legitimate job of funders; and foundations that have determined that sector wide systemic change (of whatever sort) is one of their objectives, not only have the right, but arguably the obligation to implement strategies – even ones that make demands of their grantees – that they believe may help reach those objectives.  One can argue such strategies are ill conceived, that they don’t work, that being too ambitious without allowing ample time and resource allocation to give the strategies a chance to succeed is a formula for failure – but I don’t think their underlying attempt to make systemic change is necessarily coercive.  Or, if it is, I think they have the right to be coercive (and a lot of change comes about only becomes it is coerced.)  How else can systemic change come about, if no one is permitted to make even the attempt?

I’ve been thinking a lot about Ted Russell’s question the past few days. While I agree with Barry that foundations (to the limits of their tax codes) should be able to set priorities as they see fit, I would suggest that with the power that one wields as a major funder (in a particular field or region) comes the burden to take responsibility for not only where one’s investments are made, but where they are withdrawn.

I once heard a lecture at Stanford University by Jim Phills, Jr. (author of Integrating Mission and Strategy for Nonprofit Organizations) in which he said that the more desperate an organization is for resources the less control it has over its destiny (i.e., the more likely it is to do things that are not in line with its own mission and strategy in order to obtain resources).

To coax is to persuade gently and gradually.

To coerce has many definitions but as I’m using it I would suggest that it entails pressuring another party (through action or inaction) to act in a manner that goes against their will.

For an organization that has a history of funding from Irvine, then the current shift could result in two perceived threats: (1) loss of financial support that is critical and (2) loss of the imprimatur of the Foundation. Given the possible impacts of such losses, such an organization could quite reasonably begin to feel strong pressure to adopt strategies that are not currently in line with its mission, vision or values.

I understand that foundations change their strategies with good reason. As I mentioned in my last post, it seemed that Irvine was quite thoughtful in developing its new strategy. And Irvine may be “coaxing” (from its point of view).

But if its longstanding grantees perceive that they will be out in the cold if they are not on board with the new strategy?

Well, to my mind, this is where coaxing begins to feel like coercion.

Renegotiating the value of a museum

Over the past couple of weeks quite a few people have weighed in on the Detroit Institute of Art’s successful appeal to three counties in Michigan to pass a “millage” (a property tax) which would provide $23 million per year for the museum (91% of its budget) over ten years, while it raises $400 million for its endowment to replace the tax revenues when they run out. One of the most interesting aspects of this strategy is that the DIA offered free admission to the museum only to people living in the counties that passed the levy (which equates to approximately $20 per year tax on a home with a market value of $200,000 and a taxable value of $100,000) and threatened to shut down galleries and close the museum on weekdays if the levy did not pass. If you have not been following the story, on August 7th the levy was passed in all three counties. Despite my instinct to be cautiously optimistic, I find myself mulling over this case and wondering whether it is the hands-down financial and moral victory that it seems to be on the surface.

For background and more details about the plan read an excellent overview by Judity Dobrzynski and also one by Mark Stryker. Additionally, Lee Rosenbaum (Culturegrrrl) has written a thoughtful post reflecting on the circumstances at the DIA and her perspective that it was (perhaps uniquely) well positioned to pull of such a feat and deserving of the public support. Terry Teachout astutely assessed the keys to DIA’s success, framing them as good lessons for other arts organizations in trouble. Likewise, Benjamin Genocchio examined the financial crises at DIA and LA MOCA to exhume strategies for other art museums on the brink. And one blogger asked (without much elaboration) whether DIA’s rescue can serve as a model for others.

From everything I have read about the executive director of the DIA, Graham W.J. Beal, he appears to be a very smart and capable leader. The word heroic came to mind several times as I was perusing articles about his tenure at the DIA and what he has accomplished. And I am sincerely impressed by the successful passing of the millage—it was a bold solution to a long-term structural deficit, it was executed responsibly and well, and the favorable response from the community (I presume, though I could be wrong) would seem to represent sizeable goodwill towards the institution, respect for its collection and trust in its management, or value for the arts in general.

Having said this, I have some questions:

First, I wonder what the annual net gain of this millage is estimated to be once possible reductions in contibutions, memberships and admissions are considered? I notice that the membership fees (for individuals and families) on the DIA’s Website are pretty steep relative to the $20 per year per household tax assessment: $60 for Senior Citizens; $65 Individual; $80 Companion; and $110 Family Plus. In 2009, DIA had membership revenues of nearly $4 million. Is there a risk that some (many?) of its current members will now feel that they have “already paid” and will not renew their memberships, or that the tax will crowd out future membership growth? Additionally, the DIA shows another $2 million in admission fees on its 990, some percentage of which one estimates could be lost because of the tax. Finally, it’s not unreasonable to think that some donors may now consider the DIA to be safely harbored with its millage and may reduce their contributions or choose to redirect to other organizations that do not have the heft to win such a tax.

Second, I am more familiar with such taxes being passed to support a range of nonprofit institutions, sometimes in the arts or sometimes across sectors. While I understand that a proposed tax to support 17 institutions in Detroit failed some years earlier (some suspect because it was too high), I wonder whether a tax to support a range of institutions in Detroit might have been a smarter and more ethical solution in the long run? For one, I have begun to worry that large investments in large institutions can come at the expense of the health and vitality of (arts) communities as a whole. For another, I am skeptical that many individual organizations could actually pull off this sort of feat. I agree with Lee Rosenbaum that when you read DIA’s history and track record in recent years it seems to be both deserving and well positioned for this reprieve. Could any other arts organization in Detroit successfully undertake anytime soon a similar effort now that DIA has gone this route? Is this a strategy that favors first movers only? Is it really the model that some seem to think it is?

Third, is the DIA setting itself up for an awkward renegotiation of its relationship to its community when the levy ends? Imagine a scenario ten years from now in which DIA has been unable to raise the $400 million in its endowment—a scenario that seems quite possible given the extraordinary ambition of the goal, the poor financial condition of the city, and the tremendous competition for contributions since many public services have been cutback and many nonprofits are struggling to stay afloat. DIA has already said it will not try to get the tax renewed. If it is not as flush as it hopes to be in ten years will it be forced to cut services and institute admission fees again? And will community members that have been going for free be willing to pay?

Fourth, what motivated people to pass the tax? As I understand it, the millage was not expected to be a slam dunk in all three counties. Was it civic pride and sincere appreciation for the institution/art? Competition among the counties? A logical reasoning that $20 per year to gain free admission for one’s entire household to a public museum that normally charges $4-$8 per ticket is a good deal? I wonder whether there is something we can learn from better understanding what motivated people to vote “yes” – and also how those who may have voted “no” are now feeling about the museum? Resentful because they feel that education, pubic safety and health and human services should be prioritized over art (as more than a few comments by readers of the Detroit Free Press seemed to suggest)? Or perhaps more inclined to attend and take advantage of the resource?

Fifth, what are we to make of the tripling of attendance in the week after the millage was passed? Is this a sign that even a $4 to $8 admission fee (the range of prices listed on the DIA Website) is a barrier for many, many people? That people wanted to “get their due”, or perhaps felt a newfound sense of “ownership”? That people wanted to “celebrate” the millage? I wonder if the DIA or anyone else has polled these visitors to try to determine how the millage may already be affecting people’s perceptions of the museum and their relationship to it.

Finally, and perhaps most of all, I am intrigued by DIA’s quid pro quo deal with its community. I wonder whether DIA has set a precedent that may begin to recalibrate the perceived relationship between nonprofit arts organizations and their communities and the expected ROI from future investments in the arts. This seemed to be the argument underpinning the DIA strategy: Those arts institutions that want their communities to step up and support them will need to put more than the importance of art, quality of life, and general econmic impact on the table – the people expect and deserve a tangible private benefit in return for sharing some of their hard-earned wages. And, likewise, communities that do not demonstrate support for the arts can no longer expect to receive the same levels of service or access as those that do.

Was this simply the new deal between the DIA and its community? Or does this represent a new line in the sand … a raising of the bar for all of us in the arts?

I admit to knowing only what I’ve been able to glean from newspaper accounts and blogs. I heartily welcome information and perspectives from others on these issues. in the meantime, I offer congratulations to the DIA and the greater Detroit metropolitan area for the win. It is a vote of confidence in the arts, which has clearly been heartening to many.

PS – Many thanks to all who have continued to post comments on my last three posts. I am heartened by the terrific conversation/debate. I do expect to return to some of these issues in the future.

Are feasibility studies a racket? If not, then why do so many capital campaigns derail?

Last Friday, I read a story posted on AJ about Michigan Opera getting a one month reprieve on the $11 million it must pay to Chase Bank if it is going to avoid a possible bankruptcy related to delinquency on a bond obtained for a capital expansion in 2004. How did this arts organization get here? I’m assuming there was a feasibility study at the outset and that the feasibility study gave the arts organization a green light, right?

So how did it end up several million dollars “short” on its campaign? How did we end up hearing yet another story about another arts organization struggling under the debt service associated with a new building, or struggling to maintain higher than expected operating costs following the opening of a new building, or struggling to maintain the minimum amount of cash on hand required for a bond agreement? The recession, I’m guessing, is the party line. But as we all know, there’s always more to it than the recession. Besides, don’t feasibility studies account for the possibility of economic decline when they are giving their assessments? If not, perhaps they should.

Is it possible that either feasibility studies cannot be trusted or arts organizations cannot be trusted to heed the findings from them?

I have never led a massive capital campaign for a building or endowment. I have, however, worked at an organization struggling to operate after such a campaign related to a building expansion. And I have worked at a foundation that was continually approached by organizations seeking increased support for ongoing operating costs after their new buildings were opened. Here is my slightly tongue in cheek characterization of a typical conversation with a feasibility study consultant when I was working at a foundation:

Consultant: As I believe you are aware, Leading Arts Organization has the phenomenal opportunity to build a new facility, which will blah, blah, blah.

Me: Yes, I do know this.

Consultant: Have you seen the plans?

Me: Yes, I’ve seen the plans.

Consultant: It’s going to be a phenomenal venue, don’t you think?

Me: The architecture is pretty stunning.

Consultant: I’m sure you know why we’re calling you. You have long been a supporter of Leading Arts Organization. May we assume that this means you see value in what they do?

Me: Yes, we tend to make grants to organizations that we perceive to be doing great work and that fit within the limited priorities of the foundation.

Consultant: Would you say that your grants are competitive?

Me: Yes, in the sense that we have limited means so we cannot fund everyone doing great work.

Consultant: Of course, so it’s all the more meaningful that you provide support to Leading Arts Organization.

Me: I suppose.

Consultant: Over the next X years, Leading Arts Organization will be seeking to raise an Ungodly Amount of Money Given the Size of Its Operating Budget. This amount will support both the new facility and an operating endowment. This expansion will make it possible for blah, blah, blah. I know you currently provide programmatic support to Leading Arts Organization. Would you also consider a meaningfully sized gift to the campaign within the next two years?

Me: No that is not something we are able to consider.

Consultant: I understand, and had been told that, but just wanted to confirm that information. In that case, as you can imagine, Leading Arts Organization’s operating budget will significantly increase with the move to its new building. To sustain all of the great new educational programs and ambitious, large-scale works that will be made possible once the facility is completed, it will be counting on increased support from its most loyal donors. Would you consider increasing your annual programmatic support to Leading Arts Organization?

Me: We do not promise funds in perpetuity to organizations nor can we commit to increasing the level of support that we provide in the future because an organization’s operating budget is increasing due to a facility expansion.

Consultant: I see. I notice that you made a grant to An Organization Like Ours in the past to support new programming after its new building was opened.

Me: Yes, we did. But, again, we cannot promise today that we can do such a thing in the future for another organization.

Consultant: But it is not impossible to think that, four years from now, when the building is completed, that Leading Arts Organization could apply for similar support for some of the new programs that it is planning and that you would respond favorably to that request?

Me: No that is not impossible; but I would stress that the organization should not count on such support when doing its planning.

Consultant: I see.

Then generally a bit of chit chat as the consultant reiterates the need for the facility, all of the benefits to the community, and perhaps asks a couple more questions. Then, inevitably, the call would end like this:

Consultant: So, I understand that the foundation cannot support the current capital campaign; however, it is fair to say that you think highly of Leading Arts Organization, that you understand the need for the expansion, that you are committed to continuing programmatic supporting for Leading Arts Organization through the campaign, and that you would consider increased support for new programs when the campaign is completed.

Me: No. I’m sorry if I was not clear. Leading Arts Organization should not plan on increased support from the foundation in the future. That’s what should be conveyed.

Consultant: Mmhm.

My hunch is that the large majority of feasibility studies conducted are irrationally exuberant and portray campaigns and the expansions that they support as being sustainable when, in fact, the large majority of them are not. Why would they do this? Well, the cynical side of me assumes it is because (a) consultants are not generally hired to deliver the truth; rather, they are hired to legitimize the choices that arts organizations and funders have already determined to undertake and/or (b) feasibility consultants often stand to gain from campaigns that go forward as many of them offer ongoing fundraising or building consulting services.

One thing I do know from doing a number of these interviews is that these plans are always notoriously vague. No one will ever say to a potential donor:

Here’s the deal, if we go forward, we will need you to give support from now until you die and we will need for your annual commitment to us to increase by 300% over the next three years and then by 15% every year thereafter. And if you and many other people do not do this then we will be on the verge of bankruptcy within 5 years and will need to do a special emergency campaign. At which point we will go back to everyone that gave to this campaign in the first place and make them feel obliged to throw good money after bad and keep us in this building that we cannot afford for another year or two by making what we will call a “one-time stretch gift”. Of course this is a somewhat deceptive term as we will keep coming back to you and doing this as often as is necessary to keep us in this building, for as long as we both shall live. (PS: We are, of course, counting on the fact that you will consider a bequest, as well).

So what’s the solution?

I’ve been thinking for a few years that perhaps we need feasibility studies undertaken on behalf of “the people” of the community—paid for with local government funds but hired and supervised by an independent committee. Think of it as spending a little to save a lot. Not only are many facility campaigns kicked off with massive grants from local governments but many local and state arts councils award grants on a formula basis (meaning the larger your budget the larger your grant, relatively speaking). Thus, once the facility is completed the people might expect that even more dollars will be flowing to the arts organization on an annual basis.

This audit (which could be in addition to the audit commissioned by the arts organization) would be aimed at:

  • Accurately projecting the capital campaign costs (assuming the delays and inflation that are inevitable), the size of operating endowment that would be needed to cover costs related to the facility, and realistic income and expense projections the first 15 years in the building.
  • Determining to what degree there is sufficient commitment in the community to support both the costs associated with creating or renovating the facility and the ongoing operating costs.
  • To calculate the anticipated increased amounts that would likely need to be given by the local government, major arts foundations, and key major arts donors over time (i.e., the ususal suspects that often end up holding the tab on these projects, especially when they go south).
  • To assess the feelings of the local community about a potentially significant amount of government dollars being invested in the organization if the building were to go forward (and the opportunity costs associated with that commitment). For instance, there could be a question such as: “The city is trying to decide between investing funds in a new opera venue or a new aquarium. Which of these would be more valuable to you and your family?”
  • Finally, such an assessment could assess not only the feelings of those living in the area that would be on the receiving end of any building planned for the future, but the people on the losing end, so to speak (that is, those living in the neighborhood that will lose the arts organization when it moves).

[A brief tangent related to this last bullet point: In response to my post last week on the new Barnes one of my favorite bloggers, Scott Walters, posted the comment, “While Montgomery County is certainly not rural, Merion is an unincorporated town. The move to Philadelphia continues the urban centralization of the arts.” I wonder: How did the people in Merion feel about their museum being taken away? How will the loss of the collection impact their local community? Were their voices heard in this process?]

Are capital expansion feasibility studies a racket—a deception between organizations and consultants that stand to benefit from positive assessments? If so can we fix this? Would feasibility studies commissioned by local governments help, or would those be just as corrupt? Why do so many campaigns derail and run out of steam? Why are the expansions so impossible to sustain over time? How do we get a better picture of the total costs of ownership of these buildings? How do we recognize a potential disaster in the making before loans are issued, grants are awarded, and architects are hired? And if the problem is not with the way these feasibility studies are executed and interpreted then are we to assume that donors lie when asked about whether they’ll support an organization’s expansion plans—that they promise generous support but then change their minds?

Or what else could it be? And, equally as important, who should be held accountable when these projects end up millions of dollars in debt?

I would love to be proven wrong about my suspicions in this realm and hope that those that undertake such studies, arts leaders, consultants, and donors to these campaigns will weigh in and share their thoughts.

Is Opera a Sustainable Art Form? Excerpts from a new keynote …

I’ve been on hiatus in order to concentrate my time on the weekends to learning Dutch (state exam coming up). My last post was before Mike Daisey unhinged Ira Glass and Ira Glass exposed Mike Daisey and the whole world wrote about it. I’m not going to write about Mike Daisey. Instead, because I’m still concerned about the state of the arts and culture sector in the US (despite its “turnaround” according to Americans for the Arts), and because I’m still studying Dutch and neck-deep in my research at the moment, I’m going to share an excerpt from a new talk that I gave in February at the Opera Europa Conference. The conference asked me to do a keynote on the topic, Is Opera a Sustainable Art Form?  This is just one section (from an hour-long keynote), in which I discuss the paradoxes of sustainability. I’ll be back next week.

Is Opera A Sustainable Art Form? (Excerpt)

I recently came across a paper, Paradoxes of Sustainability, by a scholar named Alexey A. Voinov from the Institute for Ecological Economics. Here are four key points from Voinov’s paper:

  1.  After examining the definitions of sustainability of many scholars, Voinov determined that all of the definitions had one thing in common: an assumption about “keeping something at a certain level” – that is, a resource, system, condition, or relationship. In other words, a goal of “avoiding decline.”
  2. Voinov says, however, (and here’s where the first paradox comes in), that this kind of behavior—the sustaining of something at a certain level or state—seems to belie the fact that living systems tend to go through life cycles: growth, followed by conservation (or inertia), followed by release (obscurity or death), followed by renewal and new growth. This life cycle is what contributes to evolution in response to a changing environment.
  3. Sustainability is, thus, an unnatural attempt to break this cycle and extend a certain stage of the life cycle and avoid decline. Whereas renewal is about development; sustainability is about preservation. The term sustainable development, thus, contains a paradox.
  4. Furthermore, there is a hierarchy of systems; and here’s where the second paradox comes in. Sustainability of a certain level of the hierarchy may impede sustainability of systems at a higher level that are potentially more important. For any ‘supersystem’ to evolve and renew its sub-systems or components must be set free to recombine.

So, what is Voinov talking about? Forest fires naturally occur and burn down portions of ecosystems so that the forest ecosystem as a whole can persist. If we begin to prevent forest fires we damage the forest ecosystem.

And so what, specifically, could this mean for the opera world and the question at hand? Well, if we agree with Voinov and think his ideas could apply to organizational systems and not just natural ones, it means that we should ask ourselves where we may be seeking the “unnatural perpetuation of what might otherwise die”? It means that we need to think very carefully about which level of our ecosystem we are seeking to sustain. So I want to return to the question at hand, which I find compelling, in large part because of the way it is phrased. Is opera a sustainable art form? It begs a question: What shall we permit to be a legitimate and sufficient form for the passing on of the opera genus?

  •  Does vinyl count? A CD? A digital download?
  • What about a diehard opera lover who has an extensive collection of recordings, listens to opera broadcasts on the radio throughout the day, and even sings it in the shower every morning?
  • What if this diehard opera fan never purchases a ticket to see a production at his local professional grand opera house?
  • What about an amateur opera company that performs in, say, churches, community centers, or senior centers?
  • How about a children’s chorus? Or 5th graders composing and performing puppet operas?
  • What about independent artist collectives creating avant-garde and experimental works?
  • Or smaller chamber companies?
  • What about the Philadelphia Opera Company’s Hallelujah Chorus Flash Mob performed at the department store Macy’s, which has been downloaded more than 7.75 million times on YouTube?

Are these what we mean by sustaining opera as an art form? Or when we talk about wanting to achieve sustainability, are we really, pretty much exclusively talking about … well, your opera house? Or even better, all of your opera houses?

So then how do we feel about San Francisco Opera’s broadcasts at the baseball park, one of which, evidently drew 32,000 people to see Aida (see picture above)? Or The Metropolitan Opera broadcasts in movie theaters which continue to expand in reach and numbers (and as I understand it, earning higher revenues and profits) year after year?

On the one hand, we need the San Francisco Opera and the Metropolitan Opera to create those broadcasts. But, over time, one could also imagine that some people would start to go to the movie theater exclusively, and not to their local opera house. Perhaps there have even been moments when we have wondered at two in the morning, sweating in our pajamas, whether the Metropolitan Opera broadcasts in a movie theater might, in fact, eventually displace some opera companies somewhere?

Is opera a sustainable art form? It’s a different question from ‘Is opera a sustainable industry?’ Or ‘Are nonprofit opera houses sustainable?’ Or even ‘Is my opera company sustainable’?

When we say we need to try to find a way to make things “more sustainable,” what are we talking about? Sustaining the reputations, salaries, and vacation packages for directors and other professional arts administrators that have them? Sustaining all historically leading institutions? Sustaining our buildings? Sustaining a canon of great works through the recording or ongoing performance of certain works? Sustaining very specific productions, or performance practices? Sustaining the capacity for artistic risk-taking? Sustaining a pool of talented artists who, perhaps, even have the resources to self-produce their works, independent of major institutions? Sustaining broad and deep community engagement with the opera? The “what” is really important.

One of the things that is most interesting to me about the conversations in the arts sector about sustainability is that the implicit goal seems to be preservation of the oldest and largest companies, and often their venues. While we seem to recognize that some deaths are inevitable, history and good sense tell us that the renewal in the sector should happen in the ongoing churn of small organizations.

That’s natural.

As opposed to the collapse or 180-degree transformation of established, historically leading institutions, which we would find not only unnatural but probably truly alarming. Hence, one concludes, the strategy of the Dutch government and others. Sustain the large institutions and let the rest of the sector churn, which we presume leads to innovation, and not to the loss of innovation from the sector.

There is an assumption that the ‘supersystem’ we are trying to sustain and grow is the infrastructure of existing large, leading professional opera houses. But what if the ‘supersystem’ is the relevance of opera as an art form as demonstrated by its ongoing practice and enjoyment? That could mean that everything else (large, historically leading companies, smaller amateur companies, training programs, the recording industry, and on and on) is part of a sub-system and may need to evolve in order for opera as an art form to be sustained.

Voinov, A. (1998). “Paradoxes of Sustainability” in Journal of General Biology, 59:1, pp. 209-218.

Making donor dollars stretch and perform miracles

The other day I received an email alert from the Philanthropy News Digest, which mentioned that a theater company had announced a $7 million endowment challenge grant. When matched, the 3:1 challenge grant (which requires the theater to raise $2.5 million) will boost its endowment from $500,000 to $10 million. Putting aside for a moment debates over the pros and cons of endowments for performing arts organizations, I was struck by the following quote by theater’s artistic director in the press:

When reached, this unprecedented offer will enable the theatre to continue growing far into the future. […] It will ensure the theatre’s ability to continue producing classic musicals and dramatic works, develop visionary new work, maintain state-of-the-art facilities for our theatre and conservatory, and remain a cultural treasure in the community.

My first (rather cheeky) thought was, “They understand they only get to spend the interest, right?” Of course, I know the theater has a smart staff and smart board and that it has accurately projected the annual income from a $10 million endowment. I do not doubt that the endowment will prove useful; and any midsized organization that can raise $10 million in this economy is to be commended. However, unless there is a crucial part of this equation I am failing to understand, a $10 million endowment cannot deliver all that is promised in that press statement.

According to Guidestar the theater mentioned in the article has an operating budget of approximately $4.5 million. Depending on how long the theater waits to begin drawing income from the endowment, and how its investments perform, it seems that the endowment will basically give the theater a boost of about 10% on its operating budget. When I glanced back through a few 990s I noted that total expenses were $4.9 million on its 2008 filing, $4.3 million for 2009, and $4.5 million for 2010. I also noted in its 2010 filing that the organization had interest payments of $271,336 related, one presumes, to the approximately $6 million debt that appears on the balance sheet (some or all of which may be for the state-of-the-art-facility).

And actually, an endowment to cover facility-related costs could be a smart strategy – though this doesn’t appear to be the primary purpose of the endowment in this case.

I recognize that the reason arts organizations put statements like the one above in materials and press announcements for endowment, ‘advancement’ and other capital campaigns is often because they feel they must do so to attract donors. But do donors believe such statements? For that matter, do the staffs and boards of organizations believe them? If so, is everyone confused five or ten years later when another capital campaign is required just to sustain current programs and put the organization on even footing again? If not, is there any reason to continue the charade?

While it may make everyone feel better in the short term is it possible this tendency to make it appear that donor gifts (large and small) can accomplish far more than is realistic has long term negative impacts on the organization and its relationship with its donors and the community-at-large? Is it possible we avoid telling the real truth because we don’t want to confront or invite others to look to closely at the total cost of ownership of our buildings, or the real costs of running our institutions and particular programs, or how much and how little (relatively speaking) is spent on various areas of operation and resources?

And on the other side of the table, it’s been more than a year since the lengthy discourse emerging out of GIA on under- and mis-capitalization of arts organizations. As we head into 2012, I’m curious whether the climate is changing and funders or individual donors (two different animals, I know) are more willing to support costs like debt service, deficits, cash reserves, sinking funds, or general operating?

If not, I’d be curious to know why not?

Image of hands stretching dollar by Sergej Khakimullin licensed from Shutterstock.

A planned ending for Merce Cunningham Dance Co.

Merce Cunningham

In last week’s post on direct subsidies to artists, I expanded upon a premise from artist/economist Hans Abbing–that direct subsidies to artists may provide incentives to more people to become artists, thereby increasing competition, and making it more difficult for any to make a living–and suggested that the same may be true of arts organizations. I wrote, “We have incentivized the exponential growth of the arts and culture sector in the US and, despite significant resources (government and private) flowing into the sector on an annual basis, we now find that both artists and the large majority of organizations are poor. There’s a lesson there.”

What the lesson may be I’m not entirely sure, but the past couple of weeks I’ve been thinking about the problem of chronic undercapitalization and its effects on the sector in the context of the final performances of the Merce Cunningham Dance Company on New Year’s Eve. The planned closure (aka Living Legacy Plan) of this renowned company has been both refreshing and disconcerting to a field that has become accustomed to dance companies struggling to sustain themselves and preserve the legacies of their founders after death. Merce had witnessed the disappointing trajectories of more than a few companies; he understood what could happen to his own company over time if it tried to persevere without the infusion of new works and his presence.

In planning for its closure, Cunningham Dance Foundation raised funds to help support (among other things) a world tour, transitions for members of its company and staff, and filming/digitial recording of Merce and the company in rehearsal and performances. This past year we were badgered with claims that there are too many arts organizations and calls for the sector to ‘make it OK’ for arts organizations to close responsibly and with dignity. The Cunningham Dance Foundation’s decision and successful implementation of that decision could be seen as a model for how to realize a ‘successful’ closure. But the very planning of the closure seemed to be what was most disconcerting for some. Despite the emotional and financial toll they take on artists, administrators, and community members it seems we prefer our endings to be either a long and exhausting battle to the bitter end or a blindside collision we never saw coming.

To plan for them seems to be an acknowledgement that we recognize and accept that it’s the end of an era.

I adore the Merce Cunningham Dance Company. I truly regretted being unable to attend the Park Avenue Armory performances on New Year’s Eve and it makes me genuinely sad that there is no possibility of a performance by the company in my future. I am quite grateful that I lived in NYC at a time when Merce Cunningham was still alive and I saw his company perform many times; I will not soon forget those experiences. But if anything, the closing has made my experiences of him and the company all the more valuable. Of course, the effects of the closure are somewhat mitigated by the existence of an incredible archive (which many organizations do not have, btw, for many reasons). The MCDC archive is also all the more valuable (and may become all the more ‘alive’) now that the company is not performing.

In the end, it seems that Merce Cunningham made a decision that was both principled and pragmatic.

And perhaps that is one of the lessons in our miserably impoverished and wonderfully abundant sector. Perhaps now is the time for both principled action and clear-eyed pragmatism.

Does it seem likely that we can continue to generate interest and support for what we do, how we work, who we are? If not, can we adapt our organizational practices, structures, and purposes to ‘the times’ without crossing a moral line or violating core values (see Phills 2005, pp. 27-28)? If not, is it better to linger on and become a shadow of our former institutions, or is it better to plan for closure, document and celebrate accomplishments, and make room for something new to emerge ahead of us?

It’s a new era.

PS: You can now ‘subscribe’ to Jumper and receive an email alert when a new post has been published. To do so, enter your email address in the form on the right hand side of this page. Thanks for reading!

J. A. Phills, Jr. (2005). Integrating Mission and Strategy for Nonprofit Organizations.

Photo by Floor [CC-BY-SA-2.0], via Wiki­me­dia Commons

How to avoid a strip-mall future for the arts sector: Lessons from the boutique label, Pi

This past week I came across a New York Times article featured on ArtsJournal examining the remarkable success of the indie Jazz label, Pi. The article demonstrates that Pi is bucking trends in the music industry. It is managing to not just keep its head above water at a time when many music labels are struggling, but it is having tremendous impact despite being a relatively small Jazz label focused on the leading edge of its artform.

Here are a few keys to Pi’s success (which I gleaned from the article):

(1)   Unlike many labels that flood the market with product (often as a hedge against the uncertainty of not knowing which will succeed or not), Pi releases a handful of albums per year and is highly selective in choosing which artists to get behind. Virtually everything it releases meets with critical acclaim. Because it has earned a reputation for consistently putting out great albums and has a very clear niche, it has a devoted (and growing) fan base.

(2)   Given its limited release schedule, and the limited revenue potential of each of its releases (these are not mainstream artists), Pi keeps its overhead low. Its owners are pragmatic and disciplined. By staying small they have been able to maintain artistic integrity.

(3)   Pi has a long courtship with an artist before it makes a commitment. Once in, however, Pi invests deeply in the development of its artists and ensures that each receives sufficient resources, attention, and support from the label. This is a critical factor in the label’s remarkable track record and reputation.

Pi’s strategies are serving both its artists and its customers.

Given an overabundance of product and seats to fill on any given night in many communities (relative to current ‘demand’) and (sorry to say) the not-quite-ready-for-primetime-quality of much the so-called ‘professional’ work that is produced and presented in the US, it’s worth considering the lessons of Pi (which are not new, of course).

It seems that more than a few overleveraged and underperforming professional nonprofit arts organizations need to both better differentiate themselves and hold themselves to higher artistic standards; to right-size their institutions and reduce fixed costs given the amount of income they can reasonably expect for the forseeable future; and to provide more time, attention, and resources to artists and to the development, production, and thoughtful promotion of artistic works.

I’d much rather live in a community with a sustainable number of boutique arts organizations than one with a deluxe mall featuring four high-end department-stores (the ‘flagship’ orchestra, theater, opera, and ballet companies) that suck up the majority of the resources and a bunch of strip malls made up of undercapitalized retail chains and mom-and-pop shops that either saw their best days in 1985 and haven’t been able to make improvements since, or were formed in recent years and (while perhaps promising) are struggling for attention, customers and capital.

I seriously fear that the strip mall nonprofit arts sector is our future. There are arts boutiques out there, but in many cities they are few and far between and seem endangered.

How and why so many arts organizations in the US have grown to unsustainable levels in recent decades is a topic that requires more reflection than I can give in a blog post. However, I will say this: it often seems that capacity building in the arts sector is (1) aimed primarily at securing the administrative futures of arts organizations and (2) resulting in an erosion of quality and distinction in artistic processes and experiences, today. I by no means wish to suggest that the answer to an overbuilt sector is to starve it into a more sustainable state; but it is reasonable to think that we need to seriously rethink how existing resources are distributed (within and among institutions).

We tend to think of a ‘sustainable state’ for the arts and culture sector as being one in which existing arts organizations have achieved equilibrium and can crank along in perpetuity. This is wrongheaded: even if we could achieve a state in which all existing organizations could secure adequate resources to keep running year-after-year, the lack of creative destruction in the sector would eventually lead to its stultification (oh wait, we may be there now). This is one of the consequences of letting some institutions get ‘too big to fail’ (and too big is relative to the size of city you are in and the other arts organizations in your market): the majority of arts sector resources get sucked into the incumbents and rather than creative destruction (reinvention of those firms or their replacement by younger, more innovative ones) we end up with plain old destruction (losing the boutiques and watching the big organizations calcify).

Pi may or may not last for another 50 years (much less beyond the lives of its owners/founders). But while it exists it is having positive cultural and social impact. That’s more than we can say about many professional nonprofit arts organizations in the US.

Generic strip-mall image by Mark Winfrey, licensed at Shutterstock.com.

 

The crucial gap once filled by Florida Stage

Last week, it was announced in the Miami Herald that Florida Stage would be filing for Chapter 7 bankruptcy protection and closing its doors for good. I am haunted by the thought that the American Theater has just lost an organization without fully grasping the critical role that it played. It appears that the move to a new space was a key factor in financial troubles that eventually left the company with a $1.5 million debt (significant for a theater of its size). This closing has left me feeling sad and disappointed in the trajectory of the American Theater.

Do funders and others understand what is at risk if we cannot sustain the midsized theaters in the US that often take great risks and do great work (think Woolly Mammoth) and often at a fraction of the overhead expense incurred by much larger theaters? As has been noted in the press, Florida Stage was one of the midsized gems in the regional theater in the US. It had a national reputation for producing new work and was a founding and leading member of the National New Play Network (a consortium of midsized theaters that work together to co-commission and produce new plays). However, it seems that this award-winning theater was not sufficiently valued by national and regional funders, donors, and audiences to sustain a $4.1 (or even $3 million) budget. Are we headed for a future in which no theater in the US can commit to a ‘season of new works’ as Florida Stage did for years?

As regards the challenges faced as a result of the move to the new space–well, I wish I could say that this was a surprising result. Unfortunately, over the past few decades we have seen way too many examples of successful theaters (and other arts organizations) seeking, or being encouraged, to trade-up to niftier digs and then falling into financial turmoil as a result. We all know this story: the first couple years generally go OK as there is often great enthusiasm for the new space and people like to put their names on buildings; 3-5 years later organizations are often panicked when they realize that that ticket sales are coming in lower than projected, the electric bill is higher than projected, and the donors that were so enthused to put their names on a brick or a wall are not quite as enthused to provide additional operating funds to support the mission and pay the running costs. Behind the eight ball, these organizations do not generally close; instead, they often ‘evolve’ their missions to suit their new buildings (i.e., begin taking fewer artistic risks).

The case of Florida Stage appears to be somewhat extreme: it seems that audiences in its new venue were significantly lower than they had been in the year prior to the move. Because they closed so quickly, we’ll never know if they might have been able to sustain a larger budget and still maintain a longstanding commitment to new works.

Last week, I penned a post for Arts Queensland’s blog: Are arts groups creating too much of a good thing, or not enough? Can we answer the question? (It’s essentially on the supply demand issue and evaluation.) In it, I wrote:

Rather than using evaluations to help funders assess and rank organizations based on one public value criterion (e.g. excellence) rather than another (e.g. innovation), perhaps they should be used to help organizations and funders alike better comprehend the arts ecosystem (how it works, where it’s healthy, and where it’s ill) and their role in it; to understand where they are playing an important role; to understand where they may be duplicating efforts or missions with other organizations; and to understand where gaps in the system exist that need to be addressed.

Not all, but certainly many small and midsized theaters are highly valued by playwrights, actors, designers, directors, and others because they will work with artists before they have established themselves (or ’emerged’ as we sometimes say) and, thereby, help to advace their careers (at which point the larger regional theaters will often pick them up). In other words, many small and midsized theaters appear to be doing critical ‘artist and repertoire development’.

It’s a sad reality that, generally speaking, it’s difficult for even the best midsized theaters to compete against the regional behemoths (with their much larger development departments) to secure high profile board members, high net worth donors, and significant grants (the exception, perhaps, being capital funds to build new buildings). Like salt to the wound, not only are midsized theaters often overlooked by donors and funders, but they often end up reading about much larger theaters being awarded grants that will enable them to commission, develop, or produce one or two new works, or put on a festival of new plays, amidst a season of otherwise safe, if not downright commercial, fare.

I’m not sure why Florida Stage could not attract larger audiences in its new space and there is, no doubt, more to the story than I could glean from the papers. Candidly, I wish the board might have been willing to form a strategic alliance with another organization, or move out of the Kravis Center and relocate back to Manalapan, before closing the doors of the theater ‘for good’. Or, at the very least, I wish that the financial troubles had been made public long before the theater reached the point of no return–allowing for the possibility of a consortium of funders and donors to come together and help the organization dig out of its debt and develop a new business plan.

Perhaps these (and other) options were considered but were not feasible? If so, I’m sorry that Florida Stage was left with no option except to close.

While $1.5 million is a significant amount of money to raise, I hope and trust that in making the decision to close the board members of  Florida Stage weighed its debt not simply against the annual operating budget of the theater and the pockets of those board members potentially saddled with the financial burden, but against the critical role and great value provided by Florida Stage in the local, regional, and national artistic landscape. Years from now, I’m betting that artists and funders will be talking with regret about the ‘crucial gap’ that was once filled by Florida Stage and has yet to be replaced by another theater.

Gold cubes image by F. ENOT, licensed at Shutterstock.com.

Outsourcing Admin: Not Just for the Money Savings

In a post a few weeks back I suggested that, rather than radical innovation, the arts sector might see some pretty great results through some common sense improvements. I suggested as an example “communities of organizations forming cooperative agreements for the use of space, or investments in shared technology, or other resources.” Strategic alliances, shared services, and partnerships sure sound good on paper but, one might ask, are they paying off in practice?

A couple weeks I ago I was directed to a great post on the blog of Betsy Sturdevant, principal bassoonist for the Columbus Symphony; it’s entitled YES, things really have changed for the Columbus Symphony. Sturdevant walks readers through the dire straits the Columbus Symphony faced the past several years and some of its recent positive changes. Here is an excerpt on the beginning of the turnaround:

The recession resulted in further decline in donations and ticket sales for the orchestra, and by February of 2010, the Columbus Symphony’s financial status had became dire.  The orchestra’s new leaders, CEO Roland Valliere and Board Chair Martin Inglis, determined that the orchestra would have to either cease operations or radically restructure.  The musicians voted to accept compensation cuts of 20% in order to save the orchestra, and the symphony’s administrative duties were turned over to CAPA, the Columbus Association for the Performing Arts. CAPA’s dynamic President and CEO Bill Conner became the symphony’s CEO, and Roland Valliere became the symphony’s President and Chief Creative Officer. Now, only a year later, it’s safe to say that the Columbus Symphony has experienced a remarkable turnabout.  The symphony has benefited greatly from its affiliation with the highly-regarded CAPA.  Turning over administrative duties to CAPA saved the orchestra thousands of dollars, and since CAPA is an extremely well-run organization with competent, dedicated employees, the symphony is now well-managed. 

The list of successes that follows is pretty impressive: revitalized board; new donors and increased contributions; amicable negotiations and a new musicians’ contract signed six months early; balanced budget; terrific new music director; two new concert series; streaming of concerts; and increased goodwill among community members.

Two keys to the Columbus Symphony’s great outcomes seem to be: (1) CAPA (Bill Conner) appears to be providing very sound management and to be gaining the confidence and respect of musicians and community members alike; (2) liberating Roland Valliere to fulfill the new position of Chief Creative Officer appears to be liberating the Columbus Symphony to renew itself and become an inspired, dynamic, more responsive, and creative entity–what arts organizations often are when they are young and small, but which they sometimes cease to be as they become more institutionalized.

I was curious about this partnership between the Columbus Symphony and CAPA and so I followed the link to the CAPA Website, whose home page looked a lot like the home pages of any number or PACs in the country, filled with promo for upcoming shows. But when I clicked on “About Us” I found a link called “Shared Services.” I clicked through and this is what it says:

Shared services arrangements offer a streamlined ticket buying experience for patrons and season subscribers while allowing our partner arts organizations to focus on their missions and the artistic quality of their work. […] Services are personalized to fit each organization’s needs, and can include marketing, public relations, finance, human resources, IT, and development/fundraising. CAPA also provides shared ticketing services … production, booking and management services.

There is a long and impressive list of organizations with which CAPA works. I am not at all familiar with CAPA or any of these partnerships; but I gather from Betsy Sturdevant’s post that Columbus Symphony’s alliance with CAPA seems to be, just as CAPA suggests, allowing the orchestra to focus on its mission and programs.

This past week Anne Midgette wrote a post called  Looking for good news about orchestras in which  she asks “which orchestras are doing the best?” and answers with the Los Angeles Philharmonic, the Pacific Symphony, Orchestra of St. Luke’s, the New World Symphony, Orpheus, and Wordless Music. She comments that these organizations represent a different approach to playing the same kind of music and then lists a few things they all have in common: “smaller administrations, more flexible concert formats, and higher-than-usual job satisfaction from their musicians” She ends saying, “Don’t underestimate these factors as a key to success in the future.” It’s a great post. I concur wholeheartedly with Anne on her list of orchestras and factors of success.

From my vantage point, it seems that Columbus Symphony might be added to the ‘good news’ column for the orchestra field. To respond to a changing environment organizations need greater flexibility. Outsourcing administration and shared services may be wise tactics for institutions (midsized, in particular) with overbuilt capacity. Moreover, outsourcing admin may leave organizations hands- and minds-free to pursue mission. 

  Two postscripts:

  1. I wish to send thanks to all who posted or emailed me directly in response to last week’s minor rant on innovation. There were some terrific comments posted, which I encourage all to read.
  2. I want to send a shout out to David Zoltan (ArtsAppeal) and everyone that presented at TedXMichiganAve. I wish I could have seen you all live and I can’t wait to see the videos.

Cubes Union image by monarx3d licensed on Shutterstock.com.

A bankruptcy and a canceled season: inevitable or entirely avoidable ends?

Recently, the Philadelphia Orchestra announced it would be filing for chapter 11 bankruptcy protection (the reorganization variety) and Intiman Theatre in Seattle let go of its staff (including its artistic director) and canceled its season in an effort to get a handle on its operations and save itself from an imminent death. These announcements (on the heels of other similar announcements) prompt a few questions:

First, whenever I hear that an arts organization has had recurring deficits (often leading to the accumulation of excessively high debt), my first question is: does this organization’s trustees know how to read an audited financial statement and a cash flow statement? This is a sincere question. Just a few weeks ago the Intiman boad announced that it had (nearly) met its first fundraising goal and had hired Susan Trapnell to help the board and artistic director come up with a long term plan. Upon being hired, Trapnell evidently made the pretty quick (and astute) judgment that the short-term operational and fundraising plan that had been in place was not a viable one (hence the layoffs and canceled season).

I know Susan and have the utmost respect for her and faith in her abilities; but why did the Intiman board need to bring Susan in to tell it that its plan was unrealistic? The Intiman trustees are presumably smart people, some of whom even run businesses; couldn’t they tell by looking at the financial statements that $1 million was not going to be enough to keep the organization going given its debt-to-income ratio and cash flow projections? I mean, c’mon. Furthermore, you don’t need an MBA to know that if expenses are exceeding revenues year upon year that the business model is not sustainable and at some point the cash is going to run out.

Unless I’m missing something, it seems that this situation might have been addressed years ago (either through permanent closure or through a restructuring of the organization in order to bring expenses in line with revenues). If it had, then perhaps Intiman could have avoided laying off its entire staff and canceling its season on such short notice. It seems that the staff and artists that work with the Intiman, as well as subscribers, suppliers, and donors are the ones now paying for the fact that this situation was allowed to get so out of control.

Second, who are the winners and who are the losers when  a nonprofit organization files for bankruptcy? Another sincere question. I understand that there are serious consequences to declaring personal bankruptcy. But is this also the case when a corporation, and specifically a nonprofit corporation, declares bankruptcy? I ask because in the announcement the Philadelphia Orchestra sent to its donors bankruptcy protection seems like a mere speed bump on the way to brighter days. The letter actually strikes me as rather upbeat in tone, all things considered. I think it’s worth asking who or what benefits from this ‘strategy,’ as it’s been called; and who or what is harmed?

To be fair, the letter does talk about the causes of the $14.5 million structural deficit. The leadership writes: “Yet, let us be frank about the myriad factors contributing to the financial challenges we face. Our structural deficit has been created by a decline in ticket revenues, decreased donations, eroding endowment income, pension obligations, contractual agreements, and operational costs.” They then go on to ask their patrons to stick by them and contribute to the upcoming “Listen with Your Heart” campaign. I found myself reading the letter again, looking for a sentence in which the board and staff actually take responsibility for having, evidently, made some poor decisions over the years. It’s not in there.

And, OK, I’m just going to ask this: In the case of Syracuse Symphony, (and other debt-saddled arts organizations filing for Chapter 7 bankruptcy protection), I find myself wondering whether its filing has amounted to, in essence, a ‘get out of jail free card’? Especially with comments in the press that they don’t want to “burden” a future organization with “the current symphony’s debt, pension liability and musician contract”. Unless I misunderstand the comments in the papers, it seems to me that it may be the current board that does not want to be burdened with repaying the debts that accrued under its watch or to honor contractual agreements to which it agreed.

Again, I find myself wondering who are the winners and who are the losers in this scenario? I’m not saying that Syracuse Symphony and other organizations that have reached the point of no return should not close their doors. But there is another way to dissolve an organization: having responsibly paid all of one’s debts and obligations and having created a financial transition plan for the staff and musicians. Of course, for this to happen one must recognize that the end is coming and have the courage to close in time, when one can still do so gracefully.

Finally, is it just me, or is it concerning to anyone else that we have evolved our major cultural institutions to a point where they are so highly inflexible that in order to ‘downsize’ or ‘transform’ they must run themselves into the ground and then declare bankruptcy?  Or cancel their seasons and lay off their staffs? Again, I may misunderstand these situations. I only know what I’ve picked up from the press articles. I welcome enlightenment from others.

These events do not come as a surprise to me (or probably to most who have been following these organizations for any time). Evidently, these ends were a long time coming. In that sense, they might have been inevitable. However, the very fact that they were a long time coming leads to me think that these ends might also have been avoidable.

Image of keyboard with ??? instead of  ‘enter’ key by Fuzzbones licensed at Shutterstock.com.

Letting go of the lifestyle to which some arts groups have become accustomed

Syracuse Symphony, Detroit Symphony, and the New York City Opera have all been in the news this past week. To some degree these three organizations share a common circumstance: the conditions under which they were created and grew over time have changed and, in recent years, they have begun to experience difficulty sustaining their operations at the level to which they (and their stakeholders) have become accustomed. These organizations are not alone in their struggles.

Syracuse announced that it is filing for Chapter 7 bankruptcy because it is unable to pay off its debts; Detroit’s musicians have recently voted to end a six-month strike, accepting pay cuts necessitated by a deteriorating financial situation; and NYCO’s chairman has announced that it is struggling to pay off a $5 million deficit and will not announce its next season until it has a balanced 2011-2012 budget. 

There should be no shame for organizations that are coming down the mountain, so to speak—just as there should be no shame in having one’s net worth and lifestyle change dramatically through divorce, or from losing one’s assets or high-paying job due to the recession or retirement. However, people (and organizations) sometimes respond to challenging material circumstances either by being in denial about them (and continuing to spend money as if they still have it) or by being bitter towards the world because they no longer have all that they once had.

Thomas Friedman writes in The World is Flat, “when a company is the pioneer, the vanguard, the top dog, the crown jewel, it is hard to look in the mirror and tell itself it is in a not-so-quiet crisis and [that it] better start to make a new history or become history.” It is, indeed, a difficult reality that many arts organizations may not be able to sustain the level of operations (the programming output, the staff size, the employment terms and salary levels, the opulent buildings, the perks, etc.) to which they have become accustomed (in the short term or even in the longer term).

Many arts organizations have closed in the last few years. By-and-large these were not ‘planned sunsets’. Those that even recognized it was necessary to change (and I’m not sure many ever did), evidently did so too late in the game—after debts had mounted beyond the point of being managed, and goodwill had eroded beyond repair. In other words, after years of being unwilling to accept that circumstances had changed.

The sooner organizations can face their changed circumstances and make the necessary changes the more likely they are to have control over their destiny. And please know, ‘make the necessary changes’ is not my euphemism for ‘birth a radical innovation.’ In fact, lately I’m beginning to wonder whether the process of adapting to a changing environment has become harder than it needs to be because funders and others have become so fixated on the idea that future success will come only through ‘radical innovation’.

I’m not saying that innovations should not be enabled or pursued, but I have a hunch we could see some pretty great results through good-old-fashioned, common-sense, it’s-about-time, just-do-the-right-thing, ‘improvements’:

  • Arts organizations avoiding redundancy and, instead, seeking to provide what’s clearly missing in the cultural landscape in order to find a less competitive and more valuable niche;
  • Communities of organizations forming cooperative agreements for the use of space, or investments in shared technology, or other resources;
  • Complementary partnerships and alliances aimed at supporting the development, creation, presentation, and distribution of work, or providing stable sources of support for artists, or providing pathways for people to discover and experience the arts.

To name just a few.

And, oh yeah, all organizations living within their means—even if their means are diminishing—and doing so with grace.

End of the Paved Road image by Tom Grundy licensed from Shutterstock.com.

What is a mission-failing arts org? Like its opposite, perhaps you know it when you see it.

STREB: The Opposite of Mission Failure

In last week’s post I suggested that the sector might be strengthened if some ‘mission-failing’ organizations were to close. I defined mission-failing organizations as those that were not providing sufficient cultural or social value relative to the investments in them. It’s an awkward phrase and I find it difficult to describe a mission-failing organization with any confidence; however, I can give an example of its opposite–an organization that is providing great cultural and social value–and did so in a talk I gave in 2010 called The Excellence Barrier.

Here’s what I said (additional comments follow the excerpt):

Susan Sontag once wrote, “Existence is no more than the precarious attainment of relevance in an intensely mobile flux of past, present, and future.”  I take particular note of the phrase, “precarious attainment of relevance.”  No organization can be granted relevance in perpetuity based on the size of its endowment, the permanence of the building it occupies, the fact that it was the first or largest of its kind in its region or city, or its historic accomplishments.  The institution exists to matter to people, in a particular community, today.  That is the impact that must be assessed.

What does impact look like if not the metrics we’re currently assessing?  Alan Brown has done terrific work in assessing intrinsic impacts and community engagement, and I couldn’t begin to summarize his research here—but I suggest you take a look at it.   I would, however, describe what I consider to be one of the best examples in the US of an organization that is brokering relationships between people and art.

In 2003, choreographer Elizabeth Streb opened a performance space in the Williamsburg neighborhood of Brooklyn, N.Y. called S.L.A.M. Instead of creating a church-like space that patrons visited once a week for a sacred experience, Streb opened the doors and let people come in anytime to watch rehearsal or use the restroom. She added popcorn and cotton candy machines and let people walk around and eat food during the performances.

Streb noticed that her patrons wanted to join in on the action, so she installed a trapeze and began teaching people how to fly. Performances largely feature the professional company, but Streb also features her students in the shows. Not content to simply use the platform of S.L.A.M. to promote her own work, Streb began fostering the development of the next generation of artists, through an Emerging Artists Commissioning Program. 

Streb no longer needs to advertise her performances because she has created a robust social network that drives ticket sales. There is a palpable energy and familiarity in the room—people know each other and interact in the space as they would at a backyard barbecue. People come back to the performances time after time and the “initiated” (kids and adults alike) delight in showing newcomers the ropes, both literally and figuratively. The experience is participatory, not transactional.

Streb’s success is measured not when the ticket gets sold at the box office, but thirty minutes after the show when everyone is still lingering, buzzing, and talking with one another and the artists. Streb is cultivating “true fans”—a diverse group of people who are deeply engaged, enthusiastic, and loyal.  As Kevin Kelly, author of the article, “1,000 True Fans” might say, Streb’s fans “buy the t-shirt, and the mug, and the hat.” Streb does not behave as if achieving artistic virtuosity and being relevant to the community are competing or mutually exclusive goals. She is pursuing excellence and equity. 

By highlighting Elizabeth Streb I am, by no means, suggesting that the sector should institutionalize her particular approaches or practices. The key takeaway is this: You cannot miss Streb’s value when you go to S.L.A.M. And I would suggest that the opposite is also true. You know a walking dead organization when you see one.

An important point: in using the term ‘mission-failing’ I was intentionally avoiding the generic term ‘failing’ as I think it implies financial failure and one cannot assume that the groups that struggle the most financially are those that are providing the least value to society. (Though it is logical to ask how sustainable, and able to maximize mission, such financially failing organizations are and whether consolidation, strategic partnership, or merger with another organization might be necessary. Brian Newman has written a terrific post, Nonprofit Arts Zombies, on this topic.)

Pete Miller asked in his astute comment to last week’s post: “What is the path forward to winnow mission accomplishing organizations from time marking organizations?” Again, there is no easy answer. With very few barriers to entry (the IRS doles out 501c3 status like XTC at an 80s rave) growth of the sector will, no doubt, continue. It will, thus, become all the more imporant that we figure out how to ensure that resources are well utilized.

I do not believe it is the role of the NEA or any other funder in the US to hold ‘death panels’ and determine which organizations are mission-failing and should close. Ultimately, it seems that it is nonprofit boards and staffs that must wrestle with this question and charge themselves to take the decision that is in the best interest of the greater good.

In the meantime, funders need to determine what to do with their limited resources. As a philanthropoid friend wrote to me last week, “You spread the pain or you concentrate it. We all know we should target, but almost everyone just spreads the pain because it’s emotionally easier.” Candidly, we may not be able to (and I know many would argue we should not) reduce the actual number of nonprofit theaters (and other types of arts organizations) that exist; but funders certainly can reduce the number of organizations that receive grants and subsidies. Private and government funders should target their resources, and they should target them to those that are clicking on all cylinders, so to speak–and within that group, might I suggest prioritizing those organizations that cannot as easily cultivate support from individual donors or develop other revenue streams.

There were several posts last week at #supplydemand. I’ve put some of them in my featured texts section. If there are other relevant posts and texts you’d like to see included send them to me.

Two housekeeping matters: (1) Here’s a new essay, Rethinking Cultural Philanthropy, which I wrote for last week’s State of the Arts Conference in London; and (2) you can now follow me on Twitter at DERagsdale.

Image of Elizabeth Streb’s book STREB: How to Become an Extreme Action Hero.

Supply and Demand Redux: Rocco’s Comment and the Elephant in the Room

I’ve been following the responses to Rocco’s ‘decreasing supply‘ comment and his subsequent post on the NEA blog. Some believe that supply/demand is the wrong framework through which to look at the sector; some that there is no such thing as too much art and that we should increase patronage rather than ‘kill’ organizations; some agree with him but believe it was inappropriate for him to make the statement; and a few seem to agree with his points and believe that it was beneficial for him to make them. I’m in the last group.

Rocco has done the arts sector a service with his ‘decreasing supply’ comment as I think it has created an opening for a candid discussion about an elephant in the room: the US lacks a mechanism for identifying and dealing with mission-failing arts organizations and (because competition for resources exists) the nonprofit arts sector might be healthier overall if some mission-failing organizations were to close. Following on my overstocked arts pond post of a few weeks ago, here are some further thoughts on the supply/demand issue.

Competition among arts organizations for earned and contributed income exists. Some markets and organizations experience more competition than others, but it is not uncommon for arts groups located in the same city to be competing to secure patronage and trustees from among the same (narrow) demographic of upper middle class well educated arts-goers and funds from one or two government agencies and a small number of private foundations and corporations.

Many arts people take the stance that we should ‘let 1,000 flowers bloom’. While one might theoretically argue that there is no such thing as ‘too much art in the world’, the same cannot be said of arts organizations: to the degree that resources are not growing at the same rate as organizations (and they are not according to the most recent National Arts Index report), every new firm that enters the sector reduces the chances of every other to secure sufficient resources to operate.

If a commercial firm experiences losses year after year—unless it can successfully develop a new market for its product, or change its product to better serve existing markets, or restructure its business to reduce expenses, or find economies of scale through expansion or merger, or achieve revenues over expenses via other strategies—it will most likely shut down.  Or it might be taken over by others who believe they can do a better job of running it. If an entire industry is in decline and there is insufficient demand for the current suppliers to cover their costs then one would expect to see firms exit the industry until equilibrium is achieved.  There are exceptions– but generally speaking, this is what one would expect because commercial firms exist to make profits.

It’s more complicated for nonprofits because while they must have sufficient cash to operate, they exist (as Andrew Taylor has succinctly put it) to ‘maximize mission’ not profits.  Nonprofit organizations do not (in theory) exist to benefit themselves (i.e., to keep arts administrators gainfully employed); they have an educational and charitable mission and exist to benefit society (e.g., to support the development of artists and people’s relationship to the arts). One cannot assume that an organization that is balancing its budget is achieving its mission and providing cultural and social value to society; nor can one assume the opposite. 

If there are nonprofit arts organizations that are not providing ‘sufficient’ value to society relative to the current investments in them by the government, private foundations, and other donors, and if they do not appear to be able or willing to adapt to fix this situation, then it is logical to assert that other more deserving nonprofit organizations (arts or otherwise) that are currently competing with them for resources would be better off if those ‘mission-failing’ organizations would close (or be re-organized).

However, even if we were able to identify ‘mission-failing’ organizations (sometimes it’s obvious, often it’s not), we do not have a clear method for dealing with the ‘dead weight’ in the sector.  We don’t have a ministry of culture and large government subsidies. If we did, failing organizations could be de-funded and might adapt or close their doors as a result. The plurality of the US nonprofit model is both a strength and a weakness. Government agencies, private foundations, corporations, and major donors give more than just their money: they give endorsements that serve as signals to board members, leaders of organizations, and other donors. Renewed support from the state arts council or one well known family foundation to a failing organization can be all that’s needed to encourage other donors to re-up and for the board and staff to persist on the wrong course for another year (despite good sense telling all of them to do otherwise).

Many organizations were started with the belief that they should exist as permanent institutions and have fought for their survival at all costs. Some of our dead weight is in historically leading ‘tall trees’ that have been preserved for far too long. Those that are the largest or that have already existed the longest are often assumed to be the most valuable. This is why many arts organizations get nervous when the cutting supply conversation happens; they assume (and with good reason) that funders and government agencies will sooner turn off the sprinklers that are misting the grass, the small bushes, and the saplings than shift the hose from one tall tree. (I’d like to see some funders prove them wrong on this.)

We lack a sound mechanism for communities to identify and deal with mission-failing organizations—those that refuse to adapt or close despite a preponderance of evidence that it would be better for society if they were to do so. There is no easy solution to this but there are opportunity costs to ignoring the problem:  again, resources going to failing organizations are resources that cannot be utilized by those providing greater cultural and social value.

The reality is that organizations will close. Some already have, some are closing as I write this, and some will die in the coming months or years. And they will either be the right organizations to close or the wrong organizations to close.  Why is it better to shut our eyes, wring our hands, and hope for the best?

Of course, dealing with  failing organizations is only part of the strategy. We still have the issue of declining participation rates. Many took offense at Rocco’s comment that ‘demand is not going to increase’; but according to a report put out by his own agency, arts participation rates have been trending downward, more or less, for more than two decades.  I don’t perceive Rocco to be a pessimist as much as a realist.

Optimistically, I believe that there is ‘pent up demand’ (read: need) for the arts that is not being realized because of financial, geographic, cultural, educational, social, logistical, programmatic, and other barriers to participation. Pessimistically, I do not see many nonprofit arts organizations radically adapting their institutions to address these barriers. I hope I am proven wrong on this.

To be clear, I’m not suggesting that every organization needs to serve its entire community (it would be unwise for all but the largest flagship institutions to even try to do so); but if a given community has 100 arts organizations, neither should 80 of them be serving the same small segment of society. Perhpas arts organizations should spend less time stewing about the ‘decreasing supply’ comment made by Rocco Landesman and more time pondering why  participation rates have been declining and why the arts and culture sector is securing a declining portion of philanthropic dollars? This may be the other elephant in the room that merits some earnest discussion. And (please) this is not a call for greater investments in marketing and fundraising; it is a call for more relevant institutions.

Elephant image by Alexander A. Sobolev, licensed at Shutterstock.com

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