The million dollar question

Every year on the first day of class for my intro course, I ask the students what they think the biggest problem is that arts groups face today.  Every year, the answer is unanimous: Funding.

When I go out to do strategic planning for cultural organizations, or meet with local arts roundtable groups, the topic that comes up most often?  Funding.

We all agree that the arts need more capacity to create.  But, as I dig deeper with my students and local arts organizations, I always ask: is more money really the root of the problem?  And, by assuming that our problems will be solved if only we had more money, aren’t we placing a burden on funders to fund us and deflecting the burden of proof from ourselves?

Last week, I posted about being nimble, and I made a comment about funders which I attributed to Stephen Butler, director of CNY Arts in Syracuse, New York.  The comment was that funders tend to funnel most of their institutional support to large organizations, which leaves smaller grassroots organizations struggling to find operating capital. Steve contacted me and requested a clarification: by saying this, he was not criticizing the funders, he was making a plea for more operating and multi-year grants for smaller organizations.  I heartily concur. But I also feel as though we need as an industry to take a close look at our economic model and figure out if it is, indeed, the correct one for the 21st century.

For most of my professional life, the national average of earned to contributed income in the arts has been about 50/50.  Obviously, this ratio varies among different artistic media and types of organizations: a performing arts organization that sells tickets will have a higher earned income ratio than a free community gallery.  But in most organizations, the presence of contributed income helps the organization keep the art accessible to its audiences.  If we were working on a for-profit model, we would have to charge as much for our tickets as it costs us to put on the performance.  This model works for the entertainment industry, which can amortize its costs through mass production (and, of course, doesn’t always work even then).  But for not-for-profit arts organizations, where the artistic decisions drive the money and not vice versa, contributed income is an important piece of the pie.

Speaking of pies, then, here is the latest chart of arts revenue sources from the National Endowment for the Arts (2012, data taken from 2006-2010).  It shows a significant shift.  Earned income is now over 60% of the national average for cultural organizations, with 14% of that being income from endowments and investments.  That means that ticket sales and other forms of direct earned income (tuition, merchandise and food sales, dues) has dropped to only 41%.

RevSourcesArtsCulture_20130923_v1Now it could be that they’ve just never broken this out before in the same way. Or it could be that the endowment building that many organizations engaged in during the 90s is starting to realize its intended purpose.  But I look at that 41% figure and I get a little nervous.  I get especially nervous when I look at the government funding and realize that it  is currently only about 6.2%, down from 10% a decade ago.

The decrease in earned income and decline in government funding places additional burden on other sources: individuals (many of whom are also buying tickets), corporations (whose pure philanthropy has decreased in favor of sponsorships), and foundations (whose income is also dependent on the success of their investments).  And speaking of additional burden, most of the grassroots organizations I know do not have endowments or even any savings to speak of.  Where do they fall on this chart?

Most people, including politicians, do not understand the need for arts funding.  As Mitt Romney said in 2012: “[F]irst there are programs I would eliminate –  the Amtrak subsidy, the PBS subsidy, the subsidy for the National Endowment for the Arts, the National Endowment for the Humanities. Some of these things, like those endowment efforts and PBS I very much appreciate and like what they do in many cases, but I just think they have to stand on their own rather than receiving money borrowed from other countries, as our government does on their behalf.”  By calling government arts funding a “subsidy,” Romney falls into the common trap of thinking that contributed income for the arts is there only because the arts can’t make it in the marketplace.  I often think that many board members believe this too.

So where do we need to be?  You tell me.  Perhaps I’m wrong in my concern, but 50/50 always seemed like a good balance to me and the new numbers have upset my need for tidiness and order.  Should we be moving toward less reliance on contributed income?  Or will that continue to make arts inaccessible to all but the wealthy?

One thing’s for sure: we need to make a better case for our income mix.  And we need to make it with everyone, from funders, to ticket buyers, to students, and to politicians.

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Jack, be nimble

“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” — Charles Darwin

We talked last time about evolution, and the need for arts organizations to be able to respond to the changes that are taking place in the economy, with our audiences and with our patrons.

Today, I’d like to talk a bit about a buzzword I’ve been hearing a lot lately: nimble.  Being nimble is the ability to respond to changes in the organization’s environment, and to be able to make changes to strategy and resources based on real-time situational needs.  For some, being nimble has surpassed growth as a primary business goal.  Which organization will survive – the biggest? The strongest? Or the one who most easily adapts?  Charles Darwin posited the answer to that question a century and a half ago.

I’m all about being nimble. In today’s economy, it seems to be a given.  We live in a time of such rapid change that many of our organizations and businesses are like Titanic facing the iceberg: not able to do anything but watch the boat crash.

Performance metrics for the arts over the past forty years have most definitely centered on growth.  Grantors asked about it on applications and often made it a condition of funding. Often, funders could come on board only for new programs and initiatives, leaving the organization stuck after a year or so with a program that needed to find different sources of income to survive.  Organizations (and researchers) touted growth statistics while making their case for the importance of the arts in our communities.  For many of us, growth was a measure of getting past the scrappy stage, the time when we had to run on the fuel of volunteers, limited supplies and equipment, and underpaid artists.  Most of us were thrilled when we got to the point in the 90s and 00s when even small communities had union orchestras and fully-staffed art museums.

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This is no secret: our big traditional institutions are struggling.  The latest potential casualty is the San Jose Ballet, who announced yesterday that they need a half million dollars to keep the doors open.  I have to think that some of this struggle has less to do with the fact that audience participation patterns are changing and at least something to do with the fact that these institutions have grown to the point where continued existence is unmanageable.  When you have a fundraising goal of eight, ten or fifteen million dollars a year, after a while the fundraising tail starts to wag the artistic dog.

I had a wonderful talk this week with Stephen Butler, director of CNY (Central New York) Arts.  His assessment was that our funding system has turned into a beast that may be our fatal flaw.  Much of the capital supporting the arts flows to the large institutions – partly because they have “proven” themselves with growth and longevity, which leaves little capital for entrepreneurial organizations.  The big institutions can’t move, and the little ones can’t afford to.

I also talked this week with Catherine Underhill, executive director of Symphoria, a reincarnation of the former Syracuse Symphony which folded in 2010.  Symphoria is operating under a $1.7 million budget, much less than the former symphony’s $7 million budget, and musicians are making about 25% what they were making before.  They’re experimenting with a number of things, including operating under a co-op structure where musicians have 50% of the seats of the board and a bigger say in artistic decisions, and offering free admission to anyone under 18 (which, Catherine says, has led to dynamic participation by high school music programs and students).  Catherine says their goal is not to grow – but to find the right size that works for their community.

I don’t believe there needs to be a mentality that we need to save our institutions just as they are or else we are endangering the very future of the arts.  I have been critical of organizations claiming that they deserve the support of the community just because they exist, and that it is unthinkable to allow a cultural institution to die just because it is a cultural institution.  In my (admittedly limited) experience, I have seen several cultural organizations fold and then come back in a different incarnation after having the luxury of planning without assumptions.  Many organizations I have watched come back stronger for having done this – leaner perhaps, but most definitely not wedded to growth as the overriding organizational goal.

No cultural organization is too big to fail, but many are too big to be responsive in the economic and social world of the 21st century.  I hope that we can find some ways to allow organizations of all sizes to find their correct balance of growth and flexibility.

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Believing in evolution

One of the primary purposes of this blog is to write about arts and cultural organizations who are discovering new rules for the 21st century – who are attempting to weather the sea changes going on in our industry by looking at the old forms, structures and program delivery, seeing which ones don’t work very well, and trying new things.

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The arts are evolving

 

The arts industry isn’t the only industry needing to evolve.  Some of our most basic products and business structures — the newspaper, book stores, retail shopping entertainment — seem to be undergoing transformations at the cellular level, letting go of formats that have served them for (in some cases) hundreds of years.  Businesses need to innovate so quickly nowadays that even businesses founded in the last twenty years like Netflix and Amazon (themselves innovators who shaped our consuming habits) are undergoing fundamental changes in the way they do business.

One of the symptoms of the sea change is the number of traditional arts organizations, like symphonies and opera companies, who are either closing their doors or radically restructuring in the wake of declining audiences, donor fatigue, and changing audience participation patterns.  While the demise of any business is mourned in a community, there is a reason that there is a different kind of wailing and gnashing of teeth when a newspaper or a symphony dies than when a restaurant shutters its doors or when a manufacturer moves its operations elsewhere.  Yes, losing that manufacturer can seriously affect the economy of the town, and the wellbeing of all the displaced workers.  But the loss of a newspaper or a symphony is the loss of something each community member has a stake in – without a newspaper, without a symphony, why, we’re back to the Wild Wild West where there are no rules and people spit into spittoons.

I have been asked why arts organizations aren’t as willing (or able) to innovate as for-profit businesses.  After all, some say, look at Netflix, who was on the verge of disaster but instead chose to revolutionize the entertainment industry by producing its own entertainment products and making them available immediately to stream – no need to wait for a season which plays out week by week.  I don’t think that is a fair comparison — after all, there are plenty of for-profit businesses which also fail to innovate and pay the price (Blockbuster, anyone?).  But I also think that there are some elements of traditional arts organizations that make it difficult to be nimble.  For example, most traditional arts and cultural organizations are organized as 501(c)(3) not-for-profit organizations.  Since the early part of the 20th century, this has been a benefit for both arts organizations and their communities; arts organizations have been at least partially shielded from the whims of the marketplace and communities have reaped the benefits of having high quality artistic activities which benefit the community as a whole.

But not-for-profits by their very nature are not as nimble as many businesses.  One of the reasons they are not is that they are dependent not only on the marketplace to sell tickets, but also on donors and grantors for contributed income.  What these two groups of stakeholders want can be very different, and it can be very risky trying something new when you risk losing not only audience, but a big grant.  Another reason is that many arts organizations are caught between a rock (traditional audiences, which many polls show are aging) and a hard place (attracting new audiences who want different programming and are open to new methods of delivery).  Newspapers know this too: it would be a lot easier if they could just get rid of the printed newspaper and move online, but they are dependent on the longtime readers who need the printed paper and the newer audiences have not been convinced that they should pay for a single source of news when you can get articles on social media for free.  Like newspapers, the most savvy arts organizations know that innovation doesn’t just mean convincing younger audiences to come to the same thing you’ve always done in the same way you’ve always done it.  But to let that go – to move toward recording, online delivery and smaller, less formal performances – means also letting go of the audience that is currently paying the bills.

Unlike some, I firmly (let me repeat, FIRMLY) believe that the future of classical music, traditional theatre and ballet doesn’t lie in playing popular music or choreographing Disney movies.  We’ve tried “pops concerts” for at least thirty years and they have not saved the symphonies.  Not that you can’t find high quality art in any genre, but an arts organization saying that they need to dumb down programming to attract audiences has lost the battle on many fronts.  If you do alternative programming, do it the very best it can be done (and PLEASE don’t call it “pops,” old people).

So.  With all of this in mind, let me state that I believe in evolution.  I believe that arts organizations can and should evolve to serve audiences of the future – and that they can do it while maintaining the very highest artistic standards.  There are arts organizations out there doing amazing things, and I am on the lookout for them.  Do you know of organizations that have tried new programming, new technology, new ways of reaching audiences?  Who are breaking out of structural boxes?  Please – share them with me.  I promise to share some with you too – starting next time when we take a look at an exciting new online class being shared by the Milwaukee Art Museum in cooperation with Google.

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See you soon!

 

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Grant writing reminders – part deux

Last time, we discussed a few grant writing reminders from my recent peer review panel experience with the Wisconsin Arts Board.  I have a few more, but I also thank those who commented with other grant pet peeves and ideas.  Here we go, round two:

1. Anticipate the reviewers’ questions.

I know that the letter of the law may ask you to just submit your financial statement or Form 990, but if there are issues that may cause questions on review, don’t be afraid to answer them, even if you think it may not look good.  As your mother always told you, what you imagine is much worse than the truth.  If your donations went way down one year because you lost a major funder who moved on to someone else, say so.  If you had to fire someone and you experienced some disarray because of this, it’s better to be honest about it.  You can answer questions truthfully without airing dirty laundry, and how you solve problems like these shows a lot about your organization.

2. Get your financial information from someone who knows something about the arts and not-for-profit accounting.

A common mistake, especially for smaller organizations who often can’t afford to pay for financial services, is that accounting is accounting and anyone who has had any accounting training will know how to organize a not-for-profit bookkeeping system.

This. Is. Not. True.

Make sure whoever is putting together your financial statements understands that you need to properly segregate contributed income from program service/earned income (ticket sales, tuition, gift shop) and that you have your restricted funds segregated on your balance sheet (don’t know what restricted funds are?  If your accountant doesn’t either, find one who does).  It’s also essential to use proper accounting terminology to avoid misunderstandings.  Many use the term “fund-raising” (incorrectly) to mean revenue generating activities outside of your mission activities (for example, a gala special event or candy sales) but these activities should be separate from donations, grants and other contributed income.  And, FYI, when the form 990 mentions “fund-raising expenses,” it means your expenses raising contributed income – not the expenses of executing a special event or the wholesale candy expense.

If you use accounting software, use a nonprofit module or program.  Quickbooks doesn’t allow for categorizing of contributed income, so unless you know how to program a chart of accounts, it won’t give you what you need.

3. Give reviewers the tools to assess your organizational health.

Here’s what reviewers look for in determining organizational health:

  • The ratio of earned to contributed income.  A high amount of contributed income vs. earned may mean that donors support your mission and want to help make your work accessible, but it may also mean that audiences just aren’t interested and true believers are propping up the organization.
  • Wide variances between budget and actual, and year to year.  ‘Splain, please.
  • An appropriate mix of artistic and administrative expenses.  Many organizations, particularly small ones, put all of their eggs in the artistic basket, spending their entire budget on artistic directors, guest artists and performing spaces.  But if there is no money in the budget for marketing or otherwise supporting the art, the organization struggles.
  • A board that understands what its role is.  A board is not a collection of super volunteers.  It is a governing body.  We need to see evidence that the board is not just slave labor for an artistic director — we need to see that there is a strong collaborative effort to make the big decisions, plan for the future and evaluate current programming.

And finally…

4. Understand where the money is coming from and speak to that.

If you are applying for government funds, that money comes from taxpayers.  Therefore, the grantor needs to know that you are spending those funds to serve taxpayers.  All of those questions about your community engagement are not just political correct-speak – it is just a simple fact that what you do must serve your community in order for you to successfully get this particular grant.  And no, despite the rhetoric about the benefits of art to communities, you do not serve the community simply by existing.  Let me repeat that for the back row.  You do not serve the community simply by existing.   And I hate to be harsh, but you also do not serve the community by occasionally giving tickets (that will probably go unused) to at-risk schools.  Serving the community, in fact, does not mean “reaching out” to people who are different than you are.  Serving the community just means that you are minimizing barriers to participation, you are engaging your community in your art, and you are responding in some way to what your community needs, rather than expecting the community to support you so you can do exactly what you want to do without accountability.

This one is so important that I may write more about it later.  In the meantime…hope you all are able to have a few Thanksgiving-y days off to indulge in rest, family and feasting!

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It’s time for a few grant writing reminders…

I just got back from a few days of serving on the grant review panel for the Wisconsin Arts Board.  This is always an invigorating exercise – not only am I jazzed (no pun intended) to hear and see the wonderful art being made around our state, I really enjoy talking with other panel members and hearing what is important to them.  I always learn something, and I always hope I contribute as much as I get in return.

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At the same time, reading and discussing a few dozen grant applications always brings out the face-palming part of me that wonders why, with so much good information out there about how to write grants and technical assistance available at the Arts Board, so many organizations shoot themselves in the foot with poorly prepared applications or stupid mistakes.  So here are a few thoughts from the front.

1. Don’t tell us how wonderful you are, show us.

At least 25% of the applications I looked at described themselves as the “premier” [choral group] [youth choir] [symphony] [community band] [jazz festival] in [the tri-county area] [central Wisconsin] [“our area”].  One organization said it was (changing some words slightly to protect the guilty) “the premier volunteer adult choir in the greater (small city) area not affiliated with an educational institution, church or larger institution.”  You gotta wonder what the competition was for that distinction.

We also listened to the work sample of a group who took pains to remind us to listen for their (again, not direct quote) crystal clear cutoffs, soaring crescendoes, luminescent harmonies and incredible balance.

When panels judge grant applications, they look for objective evidence of an organization’s claims in order to compare them to other similar applications.  Saying that you are the “premier” anything means absolutely nothing unless you were granted that distinction via an award, and actually may hurt you if the panel feels that you are engaging in hyperbole rather than being honest.

I always tell my students, show me, don’t tell me.  On a resume, don’t say you are an organized person.  Tell me about a time when your organizational skills helped you accomplish a goal or pull off a difficult task.  Likewise, in a grant application, telling us what you do and what difference it made in your community gives us far more information than calling yourself names.  It may even be possible – and desirable – to try and avoid descriptive adjectives completely in a grant application unless you are quoting from someone else.

Then again, there was the group that said they were “tied for runner-up” in their category of their paper’s “Best of” awards.  Gotta admire that.

2. Consider your work sample carefully.

Like most government arts grants, the Wisconsin Arts Board asks for work samples.  I was amazed by how many applications in the music category (which was the panel on which I was participating) included no audio or video examples of their work.  Photos tell us nothing – and in fact photos may do more harm than good since they can easily be staged to show us (for example) more diversity or a larger audience than is normal for your organization.  The best applications we saw had prepared a short audio or video clip with tightly edited samples of a variety of musical styles and concert situations.  These days, it’s not all that hard to edit a video using software included on a standard computer.  Use it.

Also, when choosing work samples, think about what your work is showing us.  If you give us just one sample, make it indicative not only of the best singing/playing you can do, but the programming you’re most proud of.  The samples we loved the best showed off commissioned works, collaborations with other organizations, and features that made your organization unique.  It should go without saying that you be authentic.  The boy choir whose sample does not include unchanged voices or the youth symphony that only shows soloists does not give a good measure of what you do.

3. Does your group have fun?  Don’t be afraid to show it! (and if they don’t, why not?)

In a famous quote from the movie Amadeus, Mozart says, “Come on now, which one of you wouldn’t rather listen to your hairdresser than Hercules?  Or Horatio or Orpheus…people so lofty they sound as though they shit marble!”  Profanity notwithstanding, I always think of this quote when reading grant applications that are trying their hardest to make their work sound incredibly serious.  In fact, some of our highest ratings were given to a group that described their work as “what Bach might have done if he were more fun and less dead,” a small community group that said they attracted a number of professionals who liked to play with them because it was fun and not competitive, and a summer camp with a glorious video of teenagers joyfully drumming on an old car.

That’s enough for now.  I may do a few more if I can get my act together in between grading papers, getting ready for Thanksgiving and the end of the semester, and furiously knitting holiday gifts.

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The infamous donut post, reblogged

My friend and colleague Linda Essig hit a nerve when she published this blog a few days ago.  It’s a great topic, and affects all of us in the arts.  Enjoy:

http://creativeinfrastructure.org/2014/03/21/just-say-no/

 

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New Rules: Death to the SOBs

Years ago, when I was working for a performing arts center that had a contract to present touring Broadway productions, one of the VPs of the producer was fond of crowing “Death to the SOBs!” whenever he heard about the struggles or demise of a not-for-profit arts organization.  By SOBs, of course, he meant the traditional arbiters of fine arts: Symphonies, Operas and Ballets.  His contention was that the not-for-profit was a failed business model and commercial entertainment – like Broadway musicals – would rule the 21st century.

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There are some problems with this basic assumption, of course.  The Broadway industry has not been immune to struggles, and we are seeing changes daily in other commercial products like film and recorded music, as they scramble to keep up with consumer preferences.  Still, we continue to hear about major arts organizations that have served communities for generations closing up shop.  The most recent casualty: the 49-year-old San Diego Opera, according to this article the eleventh major opera company to close or file for bankruptcy since 2008.

We could do postmortems on these organizations until the cows come home, as many of them had developed dangerously unsustainable business practices in recent years in desperate attempts to keep afloat.  It’s easy to criticize a company like San Diego, whose recent budget for just one production was $2.4 million, or the New York City Opera, who ate through their endowment (not-for-profit no-no #1) on their way to extinction.  It’s also easy to sound a death knell for opera – an art form not embraced by the new audiences who are needed to keep the seats filled into the future.  I’ve heard the “we need younger audiences but all the kids want to do is to listen to their iPhones” arguments, and the arguments that a decline in arts education in the schools has led to a decline in the number of people who like the fine arts.  All of these are contributing factors, I believe, but not the underlying cause.  The underlying cause has to do with a poison pill in the basic structure of 501(c)(3) organizations combined with the current corporate climate.

The poison pill is the separation of governance and management – intended by government to be a feature of checks and balances to avoid the commandeering of the mission by a single person.  But what this has evolved into is a system where major decisions are made by the governing body which sometimes has little connection with the day-to-day reality of the organization and/or little knowledge of the special rules governing not-for-profits.  In an organization with a multi-million dollar budget, that often means peopling the board with trustees who are capable of giving or getting very large sums of money — people used to influence and not particularly patient with mission.  Organizations often need to navigate the rocky shoals between wealthy patrons who give to charities the way they give to politicians – as a means of affecting policy – and the charitable mission of the organization.  Case in point: WNET’s struggles with David Koch, who pulled a 7-figure donation and eventually resigned from the board after disagreements over the airing of two documentaries which portrayed him and his brother in an unfavorable light.  Certainly it is understandable that a board member wouldn’t want to be excoriated by a media organization to which he had just donated millions…but the bottom line is that WNET and PBS are bound by their charitable mission to maintain journalistic integrity.  A single board member is not allowed to dictate programming.  Period.

Now I like opera.  I like it enough to have gotten a master’s degree in opera performance.  I am a passionate and vehement arts advocate.  But I cannot justify a budget so bloated that it costs $2.4 million for a single production and still has to charge $200 per ticket in a relatively small city like San Diego (at least, it’s not Los Angeles or New York with high cultural tourism traffic).  To me, the numbers just don’t add up.  Yes, costs are rising.  Yes, we need to pay musicians, technicians and all involved in the production what they are worth.  But if a community can’t support an organization the way it wants to be supported, and the organization is unable or unwilling to innovate, it’s time to let go and allow something else, something more flexible and less dependent on  the 1%, to take its place.

Now that I’ve opened that hornet’s nest, what do you think?

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