Business Models – Page 3 – Butts In the Seats

Removing Overhead Ratio As A Measure Is Not Enough

January 27, 2016 by Joe Patti

On Non-Profit Quarterly Claire Knowlton wrote a piece advocating for moving past a focus on overhead costs and direct program expenses in favor of full funding of non-profits by foundations. (Or at least recognition of full costs incurred by a non-profit.)

She seems to start from the premise that programs undertaken are essentially jobs non-profits do to further the interests of the funders. This sort of shifts the whole dynamic from a situation where non-profits cast about to find money in order to provide services to one where foundations seek skilled entities to solve problems for them.

Imagine if your personal paycheck were like a restricted grant. Instead of representing your value and level of responsibility in the company, your paycheck is based on a predetermined line-item budget that details exactly how you can spend your earnings. A portion of your paycheck can be used for rent, some for utilities, but most is earmarked for business attire, transportation to work, and coffee to keep you productive throughout the day. The thinking here is that by tying your paycheck to the expenses that contribute to your work, the company is making sure that you will show up on time, appropriately caffeinated, and properly dressed. It’s as if every penny of your paycheck is spent before you cash it.

To some extent, you had a say in your paycheck budget. In fact, you had to present a proposed paycheck budget when you applied for the job. Your friends on the inside said no one who spends more than 20 percent of his or her paycheck on rent has ever been hired. To get the job, you cut your rent line item. That means making do with an efficiency unit above an all-night bowling alley, but it’s better than not having a job at all. Some line items were nonnegotiable from the start: As a policy, your company won’t pay for haircuts; but that’s okay—you can let your hair grow long.

She goes on with this analogy noting that the “company” wants to make sure you are working effectively so they require you to generate reports–except that the cost of doing so will cause the ratio of time you devote on administrative tasks vs. the central tasks they are paying you to accomplish to skew higher. The employer won’t like that.

Because every penny of your paycheck is pre-spent, there is nothing left over for the future or to take care of retirement, emergencies and replacing your aging car (equipment).

In terms of a solution, she says:

“If we start to fully fund nonprofits for their day-to-day program and overhead expenses, and abandon overhead measurements as a proxy for mission fulfillment and efficiency, it’s the equivalent of giving nonprofits control over their paycheck.”

But she says the term “full costs” include:

Day-to-day operating expenses + working capital + reserves + fixed asset additions + debt principal repayment = full costs

In addition to laying out her argument, she makes suggestions to both non-profits and foundations about how they can change the conversation and practices.

Full funding of costs according to her definition would allow non-profits to be more focused on outcomes rather than compliance in order to survive.

This distinction is important. One of my initial thoughts when I read this was that what Knowlton was talking about would primarily be applicable to social service non-profits because fewer foundations would be interested in funding an arts non-profit primarily focused on creating performances.

The thing is, many performing arts organizations are just as focused on compliance and survival as any other non-profit. There are a lot of sincere ambitions that get abridged and curtailed because there isn’t possibility of revenue or funding.

I don’t know how many conversations I have had that started enthusiastically but were quickly ended by the phrase, “…unless we can get a grant to cover it.” Enthusiasm to do a week long residency with multiple interactions turns into a single lecture-demo for lack of funding. Opportunities for single lecture-demos get turned down for not being revenue generating. The outcome focused on is surviving another season.

After awhile, no one even entertains exciting ambitions and settle for minimal token gestures that will garner them a little bit of funding.

A situation where both the organizations and foundations embrace philosophies that make a complete assessment of what would be required to fully fund an arts non-profit could yield amazing outcomes from some.

In addition to funding capacity building for the organization so that everything from the board governance to hiring practices were strengthened, a rigorous study of what the local market would bear in terms of pricing, (including the optimal pricing spread for events), would provide a clear picture of what the capacity is for revenue.

This way there is a good basis for decision making by the organization as well as stronger justification of the funding that is needed to offset the difference between earned revenue, donations and program expense.

While I am skeptical full funding will happen, articles like this one and the conversation about eliminating overhead ratio as a measure of effectiveness are indications that there is potential for a shift toward more constructive policies.

Can You Care In An Unreasonable Way?

November 2, 2015 by Joe Patti

Seth Godin says he figures Apple computers reached their peak about three years ago.

Since then, we’ve seen:

Operating systems that aren’t faster or more reliable at running key apps, merely more like the iPhone…

Geniuses at the Genius Bar who are trained to use a manual and to triage, not to actually make things work better…

Software like Keynote, iMovie and iTunes that doesn’t get consistently better, but instead, serves other corporate goals. We don’t know the names of the people behind these products, because there isn’t a public, connected leader behind each of them, they’re anonymous bits of a corporate whole.

Compare this approach to the one taken by Nisus, the makers of my favorite word processor. An organization with a single-minded focus on making something that works, keeping a promise to users, not investors.

Mostly, a brand’s products begin to peak when no one seems to care. Sure, the organization ostensibly cares, but great tools and products and work require a person to care in an apparently unreasonable way.

If you are nodding your head in agreement upon recognizing that Apple’s achievements have sort of leveled out, stop a second and think about whether you are running things to make them better or just to triage and serve organizational goals.

When I read the sentence about the software not getting better but serving other corporate goals, Trevor O’Donnell’s posts about marketing reinforcing the arts organization’s image of themselves, rather than reinforcing the customer’s image of themselves having a good time, came to mind.

Obviously there is more involved with offering consistently better experiences to those who participate in the events and services you provide than good marketing. Good service, good marketing, good environment are all interdependent.

It is difficult to recognize issues that exist when you are close and involved with them which is why the Apple example is so useful. When we realize that some elements of a highly successful company have leveled off, it becomes a little easier to perceive parallels in our own operations.

The real challenge comes in the last sentence of Godin’s I quoted. What are the areas in which you and your staff can care in unreasonable ways?

What does that mean? What does it look like for your organization? Your customers can probably give you a hint if you ask (they may be already telling you, emphatically and unsolicited).

There may be people in your organization already invested in something with an unreasonable degree of care who are assets to your organization. It may not be necessary for everyone in your organization to all care about the same thing in order for you to be successful.

Given the number of hats worn by people in non-profit arts organizations, it would be a blessing if you had even a few employees that exhibited unreasonable care in different areas in a manner that was balanced within the organization and within themselves. (Trying to channel unreasonable care into all your areas of responsibility is likely to drive you crazy).

What Do We Mean When We Say Entrepreneur?

October 21, 2015 by Joe Patti

Final day of observations on last weekend’s Society for Arts Entrepreneurship in Education (SAEE) conference.

The Terms We Use Matter

Some of the best observations about teaching students entrepreneurship were made by Jeffrey Nytch from the University of Colorado-Boulder. There is a lot of conversation going on about how students need to be taught to be entrepreneurial with attendant ideas of what that means, but Nytch’s observations provide some grounding for that discussion.

He noted that what entrepreneurship is not, is pounding the pavement and marketing one self. Entrepreneurship is creating value and implementing solutions to meet needs, which by definition is not primarily focused on getting yourself employed, but serving others. Among the other characteristics he listed were recognizing opportunity, customer focus, flexibility/adaptability, risk assessment (taking calculated risks), resourcefulness and an ability at storytelling.

He also emphasized that teaching entrepreneurship has to focus on being strategic rather than providing prescriptive solutions like this is how to do marketing, this is how to apply for grants, this is how you get non-profit status etc.

When talking about teaching students to be entrepreneurs, it is probably important to be clear about what outcomes you are envisioning when you use that term. As a result of Nytch’s presentation, I have been careful to use phrases like “entrepreneurial mindset” and “teach students entrepreneurial skills” in previous posts in an attempt to delineate these activities from a engaging in a full entrepreneurial venture.

Mentoring Is Local and Global

There was another conversation about using mentoring to transition students to entrepreneurship. A good deal of the focus was on helping people after they graduated.

Something that came up often during the conference was that university career service offices have a hard time working with arts students because their career path is so nebulous. It is easy to direct students with business, education, science, teaching, pre-law and pre-med degrees because career progression is fairly well understood.

In much the same way, it can be difficult for career services to provide support to entrepreneurs because by definition they seek to walk the road less traveled.

Among the suggestions that were made, most of them by a recent graduate, was using social media to create connections between entrepreneur programs across the country. One could easily find their ideal team members living elsewhere and you don’t necessarily all have to be located in the same geographic area to be productive.

Along the same lines was a suggestion for providing some basic support and access to graduates of partner programs. A person may graduate in one place but move elsewhere to start their venture so it would be good to be able to tap into the list of local mentors another program had identified. (Imagine how great it would be to be recognized for bolstering the local economy by “stealing” graduates of other programs from those communities thanks to your mentor and incubator network.)

It was also suggested that students be invited to the Society for Arts Entrepreneurship in Education (SAEE) conferences so they can share their experiences with the assembled educators. Especially in terms of what aspects of their training did and did not prove valuable to avoid reinventing the wheel or replicating the same mistakes as someone else.

Miscellaneous Thoughts And Resources

Michael Bills who directs the Center for Innovation and Entrepreneurship at Ohio State University said they were only offering entrepreneurship as a minor at the undergraduate level because they felt that entrepreneurship is a graduate level pursuit. (I should note this is a university wide program out of their business school rather specific to an arts entrepreneurship program.)

This is based on the concept of the T shaped skills. Briefly, the vertical bar of the T represents the depth of your skills, the horizontal bar is the ability to collaborate across disciplines. Their thought is that you develop your depth as an undergrad and then really focus on your ability to collaborate as a graduate.

I have heard similar philosophies about fine arts disciplines and know there are some universities that won’t teach arts administration as an undergraduate major based on the same concept.

DePauw University recently created a site called 21CM.org (21st Century Musician) as a resource and place for conversations among musicians about developing an entrepreneurial mindset. It is intentionally devoid of any mention of DePauw other than the copyright notice at the bottom of the page. The About section makes no mention of the school and the conference presenters pointed out the site doesn’t bear DePauw’s colors.

The school took the same approach in establishing a public music space for “courageous music making” in their hometown of Greencastle, IN. The space isn’t branded with DePauw’s name or colors (it actually appears to use the 21CM.org colors) though the website uses DePauw’s domain.

In both cases, the goal is for the community of participants to take ownership of the respective resources.

That is generally the extent of my notes from the conference that fit into the general theme of these three posts. It will be interesting to see how SAEE grows as an organization and how the whole concept of artist as entrepreneur (and how best to teach those skills) evolves over time.

Even as there is a need to introduce this type of instruction in undergraduate/graduate/conservatory training, there is also the obvious unmet need to train people who have passed that stage, may have some career experience and wish to acquire additional skills or engage in a venture of their own.

Thinking About The Implications Of Local News

September 22, 2015 by Joe Patti

Arts organizations, and really any business, need to be cognizant of different environmental factors that may impact them. It is relatively easy to predict (or blame) the impact of the economy or local unemployment on earned and unearned revenue.

It can be a little more difficult to discern what effect zoning changes in different parts of your city might bring or if the adoption of Common Core standards by local schools is going to good or bad for the local arts over the long term.

Another thing that might not really be on your radar as a potential threat or opportunity is the availability and affordability of real estate in your community. An article predicting a worsening of the rental market on the Atlantic website says the number of people paying between 30%-50% of their income is expected to rise over the next decade.

The researchers estimate that the current rental crunch—the one where vacancies are around 7 percent, about half of renters spend more than 30 percent of their salaries on housing, and one quarter spend 50 percent or more—is only going to get worse over the next decade. Even if housing prices and income rise as quickly as inflation (about 2 percent annually) the number of severely rent-burdened Americans (those paying 50 percent or more) would increase by 11 percent over the decade, to over 13 million people in 2025.

[…]

According to their estimates, the current trend—where fewer Americans opt for homeownership—will continue. And that could be bad news for household finances, since a greater number of Americans will wind up using a major chunk of their income just to pay for housing.

When it is put in these terms, it doesn’t take much effort to understand that there will be less disposable income floating around with so much of it is going into housing. If you are paying 50% of your income for rent, there is that much more motivation to stay at home and get your entertainment bingeing on Netflix series.

Unless you have a lot of housing developers and public policy makers on your board that you can advocate to, there isn’t much an arts organization can do to directly impact this reality. If you see this sort of thing on the horizon for your city, you could be proactive in your next couple 5 year strategic plans to prepare for and lower economic barriers for residents who are challenged by rising rents.

Arts Colleagues, Act More Miserable And Less Passionate!

August 19, 2015 by Joe Patti

Most of us in the arts have probably heard the argument espoused by others that we shouldn’t care if we get paid a lot because we are doing what we love and apparently having fun.

After reading a recent article in the Atlantic, I started to wonder if businesses were trying to use the same psychology on a broader scale to keep employee pay low.

In one section, of the article, writer Bourree Lam interviews author Miya Tokumitsu who suggests employers are trying to monetize employee enjoyment. Essentially making customers feel good about the employees feeling good.

Tokumitsu: When I found that Craigslist posting [for cleaners who were passionate], I was super depressed. You’re demanding that this person—who is going to do really hard physical work for not a lot of money—do extra work. On top of having to scrub the floors and wash windows, they have to show that they’re passionate too? It’s absurd and it’s become so internalized that people don’t even think about it. People write these job ads, and of course they’re going to say they want a passionate worker. But they don’t even think about what that means and that maybe not everyone is passionate.

Later they mention McDonald’s recent Pay With Love effort to have employees and customers trade smiles, high-fives, hugs, dance, etc.

They say there is something of a subtext to all this that if you are theoretically passionate about your work, you shouldn’t be complaining to the boss.

As a contrast they offer the dynamic in Japan where your entire identity isn’t necessarily closely tied the job you do.

Tokumitsu: Japanese work culture is ridiculed in the U.S., [for example] the caricature of the soulless Japanese salary man. It’s not the answer to emulate any one country, but I feel like in Japan there’s a lot more respect for service workers: You do your job, and serve the public, and then you retreat to the private world. I also think there’s a sense of purpose in work that’s not based on achieving yellow smiley-face happiness. There’s a certain satisfaction to be taken from performing a certain role in society, whether you’re driving a taxi or working at a convenience store. “I’m doing something that other people are relying on,”—and that’s such a different way to regard work.

So should arts people bitch and moan a lot more about their jobs to emphasize just how much work it is?

To be honest, even without this article in the Atlantic, some sort of effort that underscored how much work went into the creation of a work was probably necessary. Some form of the “why do you want money, you are having fun,” sentiment has served as a common thread in recent orchestra contract negotiations.

But artists publicly grousing about how awful their jobs are isn’t really constructive for the arts sector.

Well, unless you are The Smiths…

Most people in the arts are genuinely pleased to do what they do. Regardless of whether they get paid a lot or not, they experience a high degree of emotional satisfaction while performing their jobs. There is little to be gained by telling them to pretend to be more miserable.

The fact they experience this emotional satisfaction is one reason people in the arts will accept lower pay than they should. But they are also increasingly realizing that the existence of emotional satisfaction should have no bearing on their financial remuneration.

You generate your own damn feeling of satisfaction, not your employer. They don’t own it and it isn’t any of their business. They aren’t giving you an opportunity to feel emotionally satisfied by working for them. It comes independently of their involvement.

Being emotionally satisfied and being financially satisfied are two separate things and arts people need to recognize that and not confuse them.

All this being said, it still comes back to the issue that some sort of awareness raising effort is probably going to be required over time to combat the perception that it is all fun and no blisters and sacrifices.

I am not sure what the most constructive manifestations of that might be.

I’m Not Just An Employee, I’m A Member

August 10, 2015 by Joe Patti

Last month Thomas Cott linked to a piece on Classical Music Magazine’s website by Catherine Arlidge where she suggested symphony musicians be more effectively used to evangelize for their art.

The one part of Arlidge’s piece that really caught my attention was when she mentioned the longevity of with the City of Birmingham (UK) Symphony Orchestra and how six members had been with the ensemble for 40 years and 59% had been with the organization for over 10 years.

It struck me that many of the symphony orchestras in the U.S. could probably claim similar statistics–or at least could until the recent trend of management-musician contract conflict which has degraded the membership of so many ensembles.

Arlidge’s point about the “employee retention” rates of these groups being among the most stable compared to most other industries made the recent slow dissolution seem all the more tragic.

Arlidge mentions the pros and cons of governed and self-governed orchestras and then goes on to suggest:

But could there be a third way, a ‘John Lewis’ vision of our UK orchestras, where players and staff are employed and are members? There may not be profits to share, but there would be a vision to share and a collective sense of ownership. If we could combine the best qualities of both orchestral governance models we could create a structure that serves our art better.

John Lewis, by the way, is a department store/supermarket/services company based in London that became employee owned in 1929.

In the context of the aforementioned conflict, a governance structure where everyone in the organization, both staff and musicians, were seen as equal members, has a great deal of appeal. It has appeared that a fair bit of the acrimony that has arisen in situations like the recent Minnesota Orchestra contract negotiations has seemed to be based on a view of the musicians as being subject to the goodwill of the board and administration rather than partners in the organizational goals.

Everyone having more equal standing with equal responsibility for contributing to the organization’s success may change the dynamic enough to avoid those types of situations as well as help the organization evolve to meet changing audience expectations.

Changing the dynamics wouldn’t be easy or quickly accomplished. There would be a lot of historical and cultural inertia resisting efforts. One issue not mentioned in Arlidge’s article is the role and composition of the governing board.

The City of Birmingham Symphony Orchestra has one, in case you were wondering if it is different in the UK. Though given the arts funding model in England, the board-artist relationship is likely much different than in the US.

One of the benefits possessed by the John Lewis Partnership Catherine Arlidge cites is a strong founding constitution which set much of the culture from the outset.

Still, the idea that management was in charge and above all others was not easy to discard. Even as late as 1957, John Lewis’ son, Spedan, whose idea employee ownership was, insisted it was important that management be concentrated in a single pair of hands, even though he hadn’t been the owner in nearly 30 years. (Granted, the company survived and expanded through the Great Depression and World War II.)

I am aware of some theater ensembles that operate in a membership focused manner similar to the one Arlidge proposes, Steppenwolf Theatre Company, comes to mind. It is fairly common for visual artists to form these type of associations. I have a vague recollection of some dance companies, but none immediately come to mind.

I was wondering if there were any orchestras in the U.S. organized in a similar manner that might serve as a good example. I am not as familiar with the range of ensembles.

Psst! You Wanna Buy A Press Release?

June 8, 2015 by Joe Patti

Last week I was reading an article on Slate that talked about teachers who were making more money selling their lesson plans online than they were from their teaching jobs.

So before I go on, let me just suggest that if there are any educational activities your organization does that you feel are really effective or if you have any lesson plans that bring the arts to other academic subjects (or vice versa), you may want to make them available on the websites mentioned in that article. There may be a good market for such things.

My purpose in this post is somewhat along the same lines. I wondered if there might not be a need among arts professionals to share materials they developed so that others wouldn’t have to constantly reinvent the wheel.

In a way, it is something of a logical extension of the idea behind Drew McManus’ ArtsHacker website which gives advice and guidance to arts organizations. (If you didn’t know it already, I am a contributor to the site.)

I am not suggesting he monetize the site. There is plenty of need for the freely given and available advice it provides.

I suspect there might be a real need for other types of materials arts groups develop in the course of business.

Just off the top of my head, there is probably a need for good marketing content for different shows. Whenever I do research on artists or shows so that I can write press releases and web/brochure blurbs, I often find that people are using the generic descriptions provided by the artist or agent.

Often the blurb is about how great the artist or performance is, but not why an audience member might enjoy the show. I find this particularly true of Broadway shows which seem to have more content about the creators and producers than the show itself. My audience doesn’t know enough about various choreographers to care about that.

I am sure there are a lot of people out there who try to craft interesting descriptions designed to resonate with their local audiences, but they aren’t easy to find. Having this work collected in one place might be a boon.

Right now the best centralized sources are the table at conferences upon which arts orgs throw their brochures.

Granted, you wouldn’t be able to use someone’s release in its entirety. Every community has its own particular nuances that need to be addressed. I don’t imagine that the teachers mentioned in the Slate article are using lesson plans on the sites without making alterations to suit their students.

After a few years, this resource may actually raise the quality of promotional writing in the arts if press releases were available for download for a few dollars from a database indexed by show/artist and community demographics.

Once people start looking at the potential approaches one might use to promote something, they may be inspired to up their own game– especially if people are paying money for good material.

It may instill confidence in a number of people who start to see a high demand for their writing. Just because an event wasn’t well attended doesn’t mean you are a bad writer. The message may have just been poorly distributed.

(Though the negative potential is that instead of hiring marketing staff, a company might have an intern aggregate content from press release samples.)

Other things people might find valuable are ideas for events surrounding a performance: everything from dinner & show promos; coffee houses; young professional wine and cheese events and after performance talks, to an imaginative use of a speed dating format to meet the cast.

It may sound a little cynical, but I could also see a demand for providing grant report content from which people could crib information. Even though a lot grant reporting feels like it involves mindless reduplication of effort with minor tweaks, against this is an area where the example of effective writing can be valuable.

I would be reluctant to have people post their strategic plans for sale since they really do need to be invested with long, tedious hours of discussion and revision to be effective.

However, case studies on how an organization manifested their strategic plan could be useful. If you are having to write about it for some grant or foundation report, you might as well make a little additional money off the effort.

The one big issue I haven’t investigated or really thought about is the issue of copyright credit. I am not sure how the teacher lesson plan sites work it. I have seen copyright notices on educational handouts. Since classroom instruction isn’t as public a forum as press release distribution and web content, I don’t imagine there is any need to give credit to another teacher before a lesson on fractions.

Would you have to give byline credit on every press release noting all the people who contributed to it as some news outlets do?

A lot of potential in this idea, but much to think about.

Investing In Social Outcomes

May 18, 2015 by Joe Patti

Non-Profit Law blogger Gene Tagaki had a post on LinkedIn a couple weeks ago about Social Impact Bonds. These bonds are a fairly new approach to funding non-profit activities. While I think they could be a viable tool for funding the arts, I had some reservations about them as well.

The biggest difference between a social impact bond and the current practice of government entities providing grants to solve the same problem is that a private investor is involved in the process.

Here’s how that might work using social impact bonds:

A government agency identifies a social problem and commits to making a payment, but only if the targeted social outcome goal is met.

An investor interested in addressing the social problem makes an investment which will may result in repayment with an additional return on its investment, but only if the social outcome goal is met.

A nonprofit organization is paid by the investor, delivers services to achieve the social outcome goal, and provides a report back to the other parties.

Typically, an intermediary develops the SIB, raises capital from the investor(s), selects the nonprofit service provider(s), and selects an independent assessor that will determine if the social outcome goal is met.

Among the benefits to this approach that Takagi lists are:

Government payments only for agreed upon social outcome results, generally shifting government funding from short-term relief to longer-term impact.

Greater development and use of metrics for impact assessment, which may contribute to a favorable change in the way government funding works in its selection of service providers, models of service, and evaluation criteria and protocols.

Investors screen nonprofit service providers for those most likely to deliver the targeted social outcome result.

The shift toward long term impact rather than short term goals would definitely be a boon for most arts organizations. But the potential for service providers to be chosen on the basis of independent analysis using different criteria can be very appealing.

Arts organizations which are well positioned in communities investors wish to impact and who specialize in providing the services desired have the potential for receiving all the funding they need to do the job rather than funding in proportion to their budget. If organizations are chosen based on effectiveness rather than prestige, smaller arts organizations may be more likely to benefit as well.

The potential downside of this approach is that because it is an investment, the desire for a return may dictate many elements of the program.

Diversion of more cost-efficient direct government and philanthropic funding of sure-bet programs to address social problems…

Investors may dictate strategies of service provision to maximize their opportunity for a high economic return on their investment instead of a high social return.

Funding will be restricted and likely prevent nonprofits from using such funds to build the necessary infrastructure to support new or expanded programs to achieve the social outcome result.

Funding for innovative and long-term strategies may be stifled by investors willing to fund only the strategies with the most proven track records of success and/or easily measured, short-term returns.

Even if your organization doesn’t participate in a Social Impact Bond program, I foresee some potential repercussions in government granting and funding taking their cues from investors. If a government entity sees that companies are investing in certain programs, they may either view it as a type of imprimatur of those programs without doing any research or developing any criteria of their own. Or the government entity may wish to curry favor or stimulate greater investment in the community by supporting investor agendas with grants and favorable rules.

Part of the process to be qualified to invest in a Broadway show is that your personal wealth be such that you can afford to lose money. That is essentially what Takagi suggests in the analysis at the end of his piece. Only true social investors who are prepared to lose money or only gain a small rate of return in order to effect a social good should be allowed to participate in the Social Impact Bond program.

I bring up the Broadway investment scheme because the same potential for damaging investor influence exists there but the agreements have been structured so that it is clear the majority of investors don’t have any say in the way the show is executed. A basic framework exists that could be applied to Social Impact Bond funding.

Your Bad Customer Experience May Be A Feature, Not A Bug

April 28, 2015 by Joe Patti

About a month ago I bookmarked a post Seth Godin had made about customer service. Since it is a little longer than usual, I waited until I had the time to come back to read it.

Now I sort of wish I had read it earlier because it pretty much runs counter to every customer service best practices article I have ever read and provides a lot to think about.

Essentially he says there are different types of customer service and a company should own the type they practice rather than pretending they are striving for something they ain’t.

Customer service is difficult, expensive and unpredictable. But it’s a mistake to assume that any particular example is automatically either good or bad. A company might spend almost nothing on customer service but still succeed in reaching its goals.
[…]
Organizations don’t accidentally run ads, don’t mistakenly double (or halve) the amount of cereal they put in the box. They shouldn’t deliver customer service that doesn’t match their goals either.

and at the end of the post [my emphasis]

Every single person who makes budget decisions, staffing decisions and customer service decisions must to be clear about which strategy you picked, needs to be able to state, “we’re doing this because it’s congruent with what we say customer service is for.”

Obviously, you can mix and match among these options, and find new ones. What we must not do, though, is plan to do one thing but then try to save time or money and do something else, hoping for the results that come from the original plan without actually doing it.

Customer service, like everything an effective organization does, changes people. Announce the change you seek, then invest appropriately, in a system that is likely to actually produce the outcomes you just said you wanted.

Between those two passages I quote, he points out ten different uses of customer service. There are some most of us aspire to. There are some that we complain about.

We read a lot of articles about how businesses need to engage with customers. So when we have an unsatisfying interaction with a company, we may complain about how they did not take the opportunity earn our loyalty. But as Godin points out, they may be reaching their goals without interacting with us in the way we want them to.

As customers, we may be like the school kid who says, I am really nice, helpful and loyal to them, why won’t they like me? Liking you may not be important to their goals.

We all probably assume this is part of airlines’ calculation, but reading Godin’s post you realize there are a lot of other companies that have decided they are doing just fine without doing much more.

My suggestion as you read his post is to take a different approach than you might normally.

Instead of thinking about all the things you need to change about the way you do business in order to meet customer expectations, be honest and consider whether the way you handle customer service isn’t just the way you want it after all.

If it isn’t the way you want it, consider what approach would fulfill your vision of success rather than what approach the articles you read say you should be using.

Whatever philosophy you adopt needs to be inline with your philosophy on programming, education, pricing and operations. Any misalignment will be apparent.

You can’t change your pricing in an attempt to attract under served audiences but have programming, education and operations oriented to serving a different demographic.

Likewise, you can’t aspire to certain goals without directing training and funding to support it.

Once you have decided what your philosophy is and what resources you can afford to direct toward accomplishing it, then you need to own that reality rather than pretend to be doing something else.

Info You Can Use: Can You Talk About Your Arts Org’s Secret Sauce In Less Than Two Slides?

April 20, 2015 by Joe Patti

A little while ago Entrepreneur website had an infographic Guy Kawasaki created of the “The Only 10 Slides Needed When Pitching Your Business.”

I bookmarked the article because even though most non-profits don’t pitch investors the way a Silicon Valley company might, they still need to convince various constituencies to support them and doing so in a simple and effective manner can be important.

Or in other words–how to do a presentation without using a massive Powerpoint presentation. Kawasaki’s infographic maps out the order in which 10 slides (15 maximum) should be presented.

At first glance, you may not think every slide is applicable, but just think about the grant applications you make. How many of them ask about your business model, strategic planning, problem you are addressing, promotional plans, evaluation method, list of board and staff members and justify why you receive funding based on past successes? All of that is in the infographic by other names.

If you are talking to potential audience members or volunteers, you can eliminate some of these slides. The question still remains, can you go out into the community and talk about the programming and opportunities you offer in a simplified and interesting way, or are you going to have a slide for each of your events?

The slides can be metaphorical by the way. This is more about tight organization of thoughts than the availability and use of a projector and screen at a presentation. Trying to include too much content in your presentation is akin to trying to cram as many images from your upcoming season in one slide in order to limit it to 10 total. It reduces the effectiveness of the whole.

Right at the top of the infographic is says, the low number forces you to focus on the absolute essentials…the more slides you need, the less compelling your idea.

Kawasaki’s chart has one slide for the Value Proposition – “Explain the Value of the Pain You Alleviate or the Value of the Pleasure You Provide,” and one slide for the Underlying Magic – “Describe the technology, secret sauce or magic behind your product…”

These are the bread and butter areas of the arts. Arts organizations are all about the pleasurable experience and magic. But can you make that case in just a couple slides, even if you were allowed a total of four slides between these two areas?

Can you do it a way that is focused on the pleasure the audience/participant will receive? Nobody buys secret sauce that only the cook thinks tastes good. People have to know they will enjoy the secret sauce as well.

Obviously, this practice is transferable to other areas of the organization, especially marketing. Can you communicate the essence of what your event is in a poster, broadcast or print ad, social media post, email blast, etc? Can you make the case for donating in a brief curtain speech or solicitation letter? Can you give a gallery tour/play talk/concert lecture that makes people want to come back and learn more or do their own research?

Will Not Let You Go. (Let Me Go!)

April 6, 2015 by Joe Patti

I don’t know if you have been following the story about the planned shutdown of Sweet Briar College, an all-women’s school in Virginia. I have been keeping an eye on the situation for the last month, having initially seen it as a positive example for non-profit organizations. Since then, the situation has evolved to the point where I am not sure if it is a positive example any longer, but can still provide some lessons.

When Sweet Briar College first announced they were going to close down, the news was generally well received. A decision to close had been made before things had gotten particularly dire. The school planned on using its endowment to provide severance packages to employees and assist students in transitioning to other schools.

All in all, it seemed like a responsible move in terms of attempting to soften the blow for employees and students rather than making an abrupt announcement that left people panicking.

Since I have written on the benefits of starting an arts organization with a definite expiration date in mind, I appreciated that they were looking to cease operations in a relatively constructive way with an opportunity to liquidate or pass on assets while they retained some value.

Later, various constituencies came together to try to save the school and called for the resignation of the president and board of trustees for not living up to their responsibilities and not exploring other funding avenues. Non-Profit Quarterly drew comparisons to other recent examples of board action, including the planned closure of San Diego Opera, where the stakeholders said not so fast and changed the outcome.

I am not going to suggest that any of these popular actions were wrong or just delaying the inevitable. However, as I thought about this in the context of the earlier idea about organizations with expiration dates, I wondered the idea were possible in practice.

Essentially, can you quit while you are still on top? When you reach the planned point to wind things down, will there be push back from people suggesting it would be irresponsible to abandon a project that so successfully serves the community? Especially if there is not a similar entity present to transfer resources to which could potentially pick up the work.

Is it in human nature that we have an easier time accepting the need to buy a new car before the current one falls apart than we have deciding to dissolve an organization? Basically, does the organization have to be further along in its decline before we will give it up?

This was what was on my mind as something I might write a blog post about until the most recent twist in the Sweet Briar College situation. It seems that the college accepted a million dollar estate gift about two weeks before they decided to close the school. The letter accepting this gift is being used in a lawsuit against the school.

This struck a real chord with me because December 23, 2013, I received a letter soliciting a donation from the Trey McIntyre Project. Then in January 2014, there came the news that the dance company was being disbanded as of June 2014. At the time, I wondered at the timing of the solicitation since they surely knew they were moving toward this decision.

Yet the letter read,

“As we look towards the new year, we are driven to educate more minds and heal more bodies through the vehicle of Trey’s art and the talent of our dancers. We need your financial support to make it happen.”

While the organization technically hasn’t closed, but rather has shifted its focus in other directions that doesn’t include the dance company, that solicitation email implies the dancers will be part of the future.

I have frequently praised the company in my blog entries, including praising them for quitting while they were still on top. That solicitation email has obviously stuck in my mind as a false note. But I think it goes to illustrate that every organization is going to make its missteps.

As to how big Sweet Briar College’s missteps ultimately end up being, that remains to be seen. There are likely more lessons to come that one can derive lessons from so the situation will bear watching.

The title of this post is, of course, inspired by one of the greatest songs of all time. Which you now long to listen to–

https://www.youtube.com/watch?v=k-ARuoSFflc

Would You Trade Board Oversight For Investor Scrutiny?

February 16, 2015 by Joe Patti

The Clyde Fitch Report takes a close look at a bill being proposed in the U.S. Senate to give Broadway investors the same tax break as those who invest in movies.

The goal of the legislation according to a press release put out by the bill’s sponsor, New York Sen. Chuck Schumer is to provide more incentive for banks and investment funds to invest in Broadway shows and therefore spur job growth.

“..Due to the tremendous risk involved, it is very unlikely that any managed fund or banking institution in the United States will lend resources for live theatrical productions, so the majority of capitalization comes from small or independent investors.”

After some analysis The Clyde Fitch Reports’ asks if there really is a dearth of investors and they wonder if banks should really be investing clients’ money in an endeavor widely acknowledged as likely to lose money.

Do you believe banking and investment institutions should gamble their clients’ money to produce Broadway shows?

Do you believe 233 names, sets of names and/or entities listed over the title of a random list of 10 Broadway shows represents a problem generating a “pool of interested investors in Broadway”?

Do you believe investors in commercial Broadway deserve a tax break?

Are there any other individuals in the American theater for whom tax-code tweaks might be desirable?

When I first read the article, I thought it was a proposal to get investors paid earlier in the process. While it isn’t, I wondered with the weight of large investment institutions present, would the arrangement get altered so that investors recouped sooner and “Hollywood accounting” adopted resulting in the creatives getting little.

I also wondered with more money behind them, would Broadway productions become more adventuresome, or even more oriented toward stage adaptations of proven works and revivals.

On the other hand, since I am always keeping my eyes open for alternative funding models, I also wondered if this might provide more options nationally to arts organizations.

When I first read the following from the Schumer press release, I thought perhaps these investment tax breaks might be applicable to artistic projects created around the country.

“On average, Touring Broadway contributed an economic impact to the local economy that was 3.5 times the gross ticket sales. This income is also vital to sustaining our nation’s theatres, as more than 50% of Performing Arts Center’s ticket sales derive from patrons attending the Touring Broadway series. This revenue permits local venues to offer opera, ballet, unique exhibitions and to fund much needed arts education curricula. Without Touring Broadway, all of these vital programs would suffer.”

Then I realized, no, what the release is saying is that Broadway needs the tax breaks so everyone else can present Broadway tours.

I am a little skeptical about the economics cited here. I don’t know about the venues with week long runs, but while Broadway audiences are among our biggest, they are also the shows that tend to lose the most money for us. We ain’t funding anything else off the proceeds.

Now if they were obliged to lower their rates for non-profits in return for this tax break, that would be beneficial to us. But I don’t see that happening.

All the same, I do wonder if the law being proposed could benefit people in other parts of the country looking to run a performing arts center as a commercial enterprise by allowing them to solicit investors.

Or perhaps it could help turn other cities into development centers by attracting investment for works that weren’t necessarily contemplated to go to Broadway but rather stay put in Portland, Minneapolis, Miami, etc. as a significant attraction for the region.

The productions may not gain the same cachet it would from Broadway, but what it did develop might be enough to create regional or national interest in a tour of say a multi-media dance work that generated a respectable return on the investment.

If the legislation is not written in such a way to include non-Broadway productions, is it worth lobbying to have the scope widened?

As the title of this post suggests, it would change the complexion of the way performing arts entities operated.

By Faith Alone

February 10, 2015 by Joe Patti

Yesterday I wrote about the need for grace in the face of criticism. It must have struck a chord with some folks because the traffic to that post exploded (I am sure a great deal of credit goes to Thomas Cott, though.)

Today I wanted to touch upon the equally frustrating, but much more gratifying “that was amazing, too bad more people weren’t there,” event.

To be clear, this isn’t the show that your staff and arts insiders from your community thought was excellent for its artistic quality. This is the show at which 100 regular members of the community filtered into your 550 seat theater and absolutely loved it.

You know they loved it because right at intermission as you move to use a urinal a total stranger thanks you for taking the time to visit his group and tell them about the show.

(If you are a guy, understand just how much he must have loved the show that he couldn’t adhere to the unspoken rules about not holding a conversation with a stranger at the urinals.)

You know they loved it because strangers keep coming up to you at restaurants and supermarkets for weeks later to tell you how excited they were.

Not to mention the social media conversations that you may catch.

This is the type of reaction that makes a career in the arts worthwhile. Few other professions get this sort of heartfelt thanks.

Except, you know, you would probably be okay trading a “that was awesome” for “that wasn’t bad” if it meant having 300-400 more people in the audience.

That brings me to the real purpose of this post, which is to ask a question.

There is some received wisdom that once people learn they can trust your organization to provide a quality experience, they will be more willing to take a risk on unknown and unfamiliar shows.

So my question is, is that really true? Can anyone point to a case where their local community grew to trust their judgement and attended unfamiliar events in sustainable numbers based on faith?

I am not talking simply about growing an audience. I increased attendance at dance concerts when I was in Hawaii. But that was more about marketing and making dance programs and schools more aware of performances and talking to them about what we were planning for next year.

While this certainly generated trust in our work, it was more a matter of effectively tapping into an existing interest group than cultivation.

I have also definitely had people who have said they weren’t sure about a performance, but attended because they knew we did quality and interesting work.

The problem is that their numbers were relatively small and while they may have represented the unexpressed sentiment of a larger group, attendance often made it clear there weren’t numbers to be sustainable.

At the base of this is the necessity of taking a critical look at whether pursuing audience trust as a long term goal is realistic or is it a pleasant ideal to which non-profit arts organizations have subscribed.

Research has shown that audiences in general don’t discern between whether an event is being held by a for-profit or non-profit entity when choosing what to attend. With that in mine, are there that many in our communities that really appreciate that you are pursuing excellence when others seemingly are not?

It is likely that audiences aren’t thinking in terms of excellence as much as having an awesome or amazing experience, and that is fine. But we all know that it is relatively easy to provide an experience that will be evaluated in these terms by offering a commercially recognizable name.

So again I come back to the question, after having mastered marketing and awareness building, has anyone managed to grow a following/loyalty/what have you, in your community based on faith in your work? How did you do it? Where did you do it? What is the scale of the program?

I don’t doubt that success is possible in cities and communities where the underlying dynamics encourage curiosity and experimentation. But a lot of those places can have higher costs of living so question about being self-sustaining becomes relevant.

Since there is rarely anything in the arts that is truly self-sustaining, what I mean is a program central to the organization’s operations that has become increasingly less dependent on grant support or infusions from other parts of the program. An after hours program doing edgy programming in the black box theater seating 80 is being subsidized by all the other events that keep the organization in business.

A company that has gone from not paying anyone and depending on everyone to costume themselves to paying a stipend equivalent to $1.12/hr and costuming from Goodwill is an improvement, but probably isn’t a proven model yet.

Info You Can Use: Minimalist Design and Slide Decks

December 17, 2014December 16, 2014 by Joe Patti

I just finished teaching a public speaking course this semester. One of the pieces of advice I tried to emphasize for my students was not to fill your Powerpoint slides with tons of text.

It was difficult to accomplish this goal. I must confess part of me was secretly pleased that members of the visually oriented Millennial generation were having the same struggles with simplifying their presentations as those who pioneered the use of Powerpoint.

This being said, the minimal look is definitely in.

Drew McManus has been advocating for flat and responsive web design for awhile. You can also see the increased use of a page spanning dominant image on sites like TED.com

and the Weather Channel

The SlideShare blog recently featured slide decks that Guy Kawasaki promotes for aspiring entrepreneurs that translates this minimalist approach to slide decks. The first has a lot of great examples of text heavy slides that were heavily trimmed down and had a single central concept set against a single dominant image. (requires Flash)

[slideshare id=295996&doc=sample-slides-by-garr-reynolds-1204852162670051-5]

Slide number 5 provides a good example of how to transition from what might be your current practice to a more minimalist approach, taking an image of President Kennedy from the corner and making the slide all about the image and his “Ask not…” quote. Many of the other slides are an example of an entirely revamped approach to a topic.

The other slide deck that caught my eye was the third. It provides a template to help a marketer create a presentation about different customer personas. It is created as something your organization or company can use immediately to present what you know about the different demographics that comprise your customer.

When I immediately, I mean it is pretty much designed so you can download it right now, delete the instructional and example slides, plug in the relevant data and images and use what remains as a basis for a presentation if you want. (requires Flash)

[slideshare id=30601327&doc=buyerpersonatemplate1-140129195502-phpapp01]

Basic Intro To Finance Options

December 10, 2014 by Joe Patti

When I was at the Ohio Arts Council conference yesterday, I attended a session on finance for arts and culture. This is unknown territory for me because I am familiar with grants and fundraising, but don’t really have any significant experience with finance.

One of the things I learned were the differences between Community Development Finance Institutions (CDFI) and Community Development Corporations (CDC). (Which is to say, I know slightly more than the textbook definition, but enough to start paying attention and learning more.)

There were representatives of each of these type of organizations as well as banks and venture capital firms talking about somewhat familiar financing options like bonds. There were also tools that I had no idea a non-profit organization might consider like the EB5 program which provides foreign investors with a fast track visa process.

While I had a sense that a non-profit might get funding from a revolving loan fund, I had no idea that a non-profit might actually run one. One option mentioned during the panel was possibly partnering with people to run your fund and coming in as a second layer on a loan that a bank was underwriting.

The panel made us aware of New Market Tax Credits which CDFIs sell to banks to encourage them to fund/invest in projects in low-income, high-poverty, high-unemployment communities at a lower rate. They encouraged us to Google the terms “New Market Tax Credit Arts Culture” to see what sort of projects popped up in order to get a sense of what was possible.

There were some main points the panel wanted those seeking financing to walk away from the session knowing about:

• Investors want to know how your project fits into the overall vision of: your city, foundations providing support, other funders, the community and your own organization.

• Even if they don’t explicitly say it, economic developers are looking for how the project provides cohesion in terms of issues like market change, safety and stability in the community. Economic developers don’t concern themselves about the health of an arts and cultural organization except as an attractor of new business and enhancer of quality of life. They noted one of the reasons businesses are starting to orient back toward downtowns is because the density of activity provides for connectivity and innovation.

• They emphasized that no one source will provide 100% of the funding. It is going to have to come from a mix of economic development entities, banks, public and private grants and donations.

• As a result, you need to have all parties at the table, even ones that you won’t necessarily need immediately. You don’t want to be in position where you realize you will need extra funding and go to someone at the last minute saying you need money, trying to explain your project to them and get them connected to your story.

• The panel explicitly said, if you start talking to these entities when you have a project in mind, it is already too late. You need to be telling your story and have people aware of it years in advance of soliciting support for a project.

Ultimately, it seems like you have to be telling your story every day, all the time to your immediate community in order to gain short term support for your projects and to anyone else who may ever remotely be of any use to you for a hypothetical project.

To heck with “Always Be Closing,” you need to be “Always Be Charming” (Yeah, that stinks. Anyone has a catchy phrase, let me know.)

An interesting suggestion about bolstering confidence in your organizational story was to devote part of your annual budget to enriching your endowment in order to show potential investors that you are investing in yourself.

It was notable that the first question asked after the presentation was about the shame directed at non-profits for overhead and the fact they might try to pay people a living wage. One of the panelists said people shouldn’t be ashamed and that foundations should know better.

However, I felt like he was sort of hedging when he said to break down administrative cost by task rather than by roles and titles. For example- assessment, program administration, engineering, capacity building.

I didn’t feel that overhead cost was of particular concern to the people on the panel. Their criteria for good governance and success seemed more aligned with the for-profit sector. So the fact this came up immediately may be a sign that the subject of judging an non-profit organization by overhead costs will become a more prevalent topic in the next couple years.

Don’t Wait Up, I’m Going Cruisin’ With The Actors

November 4, 2014 by Joe Patti

If you are in the entertainment business, it appears Netflix is shaping up to be the major nemesis. HBO is going to let you stream their series without cable as a way to respond to people dropping their cable subscriptions and shifting toward Netflix. Movie theaters are vowing to refuse to screen the new Crouching Tiger, Hidden Dragon movie because it will be released on Netflix at the same time.

So what are live performance companies to do? It is pretty difficult to be ready to perform on demand. Sure recording your performance and posting it on YouTube is always an option, but you’re trying to perpetuate the benefits of attending events in person.

Well, I don’t know if it is THE answer, but one possible model for study might be found in a post on the HowlRound website this past July. Jean Ann Douglass and Eric John Meyer do theater in a truck. People buy tickets online and at 4:00 pm on the day of the show, they receive an email about where to find the truck. Such an arrangement allows for the possibility of having a show centrally located to the bulk of your audience.

Now granted, with a capacity of only 15 people, the scale is a little small. However, as they point out, it allows a great deal of flexibility in positioning a performance.

Another appealing aspect of this work is the freedom it affords us as producers and presenters. We can rent our venue anytime, anywhere across the country

One of the key elements of their performances are bars with bathrooms. While the performance could theoretically be performed in any parking lot, the audience needs restroom facilities. At intermission, the audience is sent off to a nearby bar and when they return, they view a second, entirely different play. Then after the performance, you can have a drink with the performers.

There is a lot of potential for symbiotic relationship between bars, restaurants and other businesses in this performance model. There are probably a good number of places that would be happy to have a guarantee of 15 customers coming in at a known time.

Obviously, weather is a consideration since it can get too hot or cold in the back of a truck. However, I imagine anyone who was really serious about bringing performances into different neighborhoods in on a consistent basis would make the necessary alterations.

As I sit here, I have visions of the invention of entirely new ways to staging shows to accommodate the form of tractor trailers and shipping containers. Not to mention the rise of companies specializing in taming the acoustic qualities of these spaces.

After working wonderful performance halls, it is probably depressing to even contemplate having to resort to such rough conditions to provide the experience of live performance. But let us not forget that wagons were the primary delivery mode for performance once upon a time.

With the convention of performance hall audience behavior out the window, entirely new possibilities might open up with people using electronic devices and social media to interact with the performances. The novelty of going cruising with a performance troupe might be very appealing to people.

Info You Can Use: Take A Look At The Broadway Books

October 20, 2014 by Joe Patti

Though I don’t cite him very often, I keep an eye on the blog of Broadway producer Ken Davenport because he tends to ask questions about how Broadway can do a better job of serving the public.

We often see Broadway as a monolithic behemoth to whose gravitational pull most theaters are subject to some degree. It is interesting to see someone talking about how the business process in NYC might not be living up to its potential and gain insight into some of the inner workings.

In the next two weeks Davenport is going to conduct webinars breaking down the budgets of a Broadway show. These will be held on October 22 and 29, both from 7-8 pm EDT with a recording posted afterward. (my emphasis)

Over those two nights, I’ll walk you through my philosophies of budgeting, a strategy to make sure you come in under budget on every single one of your shows, and most importantly I will walk you through each and every line and page of an actual Broadway budget.

In other words, if a budget is the engine of a Broadway show, I’m going to pop the hood, take apart the motor piece by piece, and then put it back together again . . . so you not only understand how it works, but so you can build your own.

[…]

It’s going to be fun, and if you’re a numbers guy/gal, you’ll really love it. If you’re not a numbers guy/gal, well, all the more reason for you to sign up, because budgeting is where so many shows go wrong. It is the business blueprint of your production.

I emphasize this second to last sentence because even if you never think you will ever mount a Broadway show, this is an opportunity to have someone talk about a budgeting process for a performance.

For everyone who talks about transitioning away from the non-profit arts business model, this is a good opportunity to gain insight into what factors you need to consider in the commercial realm, even if you are already pondering a third (or fifth) alternative.

Info You Can Use: Fiscal Sponsorship As Apprenticeship Program For Non-Profits

August 12, 2014 by Joe Patti

Non-Profit Law blogger Gene Tagaki recently tweeted a link to an article he wrote for the American Bar Association about 5 years ago urging lawyers to consider alternatives to forming non-profits organizations for their clients.

I should note that this article was written before the first Benefit Corporations were legal in the U.S. so that also remains an option to forming a non-profit.

One of the biggest considerations for not forming a non-profit is the fact that there are so many, with more being formed every day, but an ever shrinking supply of funding to support their efforts.

“Ron Mattocks, author of Zone of Insolvency: How Nonprofits Avoid Hidden Liabilities and Build Financial Strength, asserts that as many as one-third of the nation’s 1.4 million registered nonprofits operate in the zone of insolvency.
[…]
If a nonprofit is insufficiently prepared to compete and operate in such an environment, the end product may be gross inefficiencies, frustrated founders, disillusioned donors, and fewer resources ultimately reaching its intended beneficiaries.”

There is also the issue of whether the founders have a realistic business plan that is viable amid the economic conditions present. Takagi also spends some time cautioning against founder’s assumptions of the amount of control they can legally exert over the organization.

Among the alternatives to forming a non-profit Tagaki suggests is actually working with an existing non-profit. I often wondered, if people are able to muster the resources to create an entirely new non-profit that overlaps or competes with an existing one, why not first approach the existing non-profit first proposing to enhance their efforts with an ancillary or complementary program.

That is pretty much what Tagaki suggests:

When appropriate, lawyers should make their clients aware of the following benefits of working with an existing nonprofit:

-Avoidance of start-up costs and administrative burdens of a new nonprofit.
-Increased efficiency in furthering the charitable mission by using an established infrastructure.
-Opportunity to gain experience and expertise in running a nonprofit.
-Development of connections in the nonprofit community.

Collaborating with an existing nonprofit is an alternative that may be considered even where the contemplated charitable idea is not currently being implemented by an existing nonprofit. A nonprofit with a compatible mission may be receptive to implementing and operating a new program, particularly if a volunteer is willing to bring resources to the table. Alternatively, the nonprofit may have institutional knowledge relating to the charitable idea and its implementation. Moreover, the nonprofit may open doors and leverage assets that might not be otherwise readily available, such as

-Existing resources, including staff, volunteers, infrastructure, and systems.
-In-house experience and expertise, which may allow the contemplated program to be launched and operated efficiently and in compliance with the law.
-Donor and business relationships, including with institutional funders, nonprofit leaders, allied organizations, and the media.
-Goodwill, which may provide the program with name recognition and built-in public trust.

The other alternative he suggests is a Fiscal Sponsorship where a project is housed within the auspices of an existing non-profit. It allows the project to take advantage of the non-profit’s status without needing to create a separate entity. If the sponsorship agreement is written correctly, the project has the freedom to move to another non-profit or perhaps spin off as a separate non-profit once they have experienced sufficient growth. Fiscal sponsorship arrangements have been used to host short term projects or as an incubator for fledgling non-profits.

The Sponsor usually retains a portion of the gifts as a fee (5-10 percent is common) and allocates the rest to the Project. The Project Initiators may serve as employees or volunteers of the Sponsor delegated with the responsibility of operating the Project. They also may retain the right to move the Project to another Sponsor or to a new exempt organization created to permanently house the Project. Any such rights should be precisely spelled out in the fiscal sponsorship agreement.

Fiscal sponsorship may provide a Project with immediate tax-exempt status, advantageous treatment as a public charity (i.e., nonprivate foundation) without independently passing a public support test, some degree of administrative support, and a governing body that has a duty to ensure that the Project is operating in compliance with applicable laws. The Project Initiators must weigh such benefits against a lack of autonomy; their limited control over the Project, which remains under the ultimate control of the Sponsor; and the sponsorship fees.

The trade-off aside, if a fiscal sponsorship agreement is written well it can be an extremely helpful process of essentially testing the viability of a concept and learning how to run a non-profit organization without incurring the start up costs.

I was not aware that this option really existed. It might almost be better if aspiring non-profits pursued this option more regularly. Even if it didn’t result in new organizations spinning off all that often, it could potentially create more robust non-profit organizations. (Perhaps even resulting in more nimble sponsored programs growing to subsume their nominal sponsoring parent.)

Since the fiscal sponsorship option is relatively unknown as an option, perhaps the biggest hurdle will be getting both parties prepared and willing to engage in such an arrangement.

It is well known that non-profits start new programs in order to garner funding to support their main goals. It would be easy for a sponsoring organization to starve the program it agreed to house of the resources it needs to succeed. From the other side, as Tagaki mentioned, once you bring your program under the auspices of a fiscal sponsor, their priorities need to become your priorities to a large degree.

Stuff To Ponder: Professionalizing Non-Profit Boards

August 5, 2014 by Joe Patti

Via Tyler Cowen at Marginal Revolution is a proposal put forth in the Stanford Law Review suggesting replacing board members with a professional board services company.

When I first saw the title “Why Not Put a Firm on Your Board” on Cowen’s blog, I thought maybe the Stanford article was going to be a satire of the whole “corporations are people” idea that is the basis so many recent Supreme Court decisions. However, they are completely serious and there is some sense to what they propose. (Though I suspect they may still have been inspired by the court.)

As I read the article, I started to wonder if something similar might be good for non-profits. The article is definitely aimed at large for-profit corporations, but the fundamental problems are the same:

-Both for and non-profit boards are comprised of people who have other day jobs and don’t have the time, either during or outside board meetings, to exercise proper oversight of the corporation.

-Board members either get too little information about the corporation to do their jobs, or are overwhelmed with too much.

-Board members often don’t possess specialized knowledge about the entity they are overseeing and therefore can not make good decisions.

-Finally, board members are in a position where they are more loyal to the management of the company than to the general community of stakeholders.

The articles authors propose a company, which they dub “Board-R-Us,” to provide professionalized oversight of management and assume legal liability for decisions made. I am not convinced that these companies wouldn’t succumb to pressure and influence from their clients like Arthur Andersen did or via their own corporate owners.

That aside, there were some compelling reasons for speculating on whether something like this might be viable for non-profits. In addition to the problems with effective oversight mentioned above, non-profit arts organizations often express frustrations trying to recruit a board that better represents the demographics of their community or target audience.

A board services provider (BSP) could recruit and train board members for a non-profit organization. A BSP would likely have extensive contacts at many companies, service organizations, universities, etc developed in the process of searching on behalf of many organizations which would make the search easier for them than for board nominating committees.

The BSP could advise both the organization and the board members about how to more effectively interact with each other so that neither dreaded attending regular meetings.

I am not sure if a BSP would essentially just be a recruitment firm or if the board members would work for them. The former situation would more easily permit board members to serve voluntarily. The latter might require a stipend of some sort.

I am not sure how a stipend might be resolved legally, but if a board member was paid by a separate company and if it wasn’t much more significant than gas money, it might pass muster.

One of the benefits of engaging a BSP for a non-profit is that you could actually have a healthy rotation of people through your board when the BSP assigned new people as terms expired.

A robust rotation system might also prove an incentive to companies to encourage employees to participate in non-profit boards via a BSP. The networking opportunities available as people rotated through the boards of different organizations can be valuable to companies. If the BSP is helping the non-profits provide pertinent information in an organized manner and the board meetings are being run efficiently, few may feel the experience is a waste of their time.

These scenarios assume a situation similar to the current arrangement of part-time board members helping to manage a non-profit with some guidance and oversight from a BSP rather than full-time oversight from a BSP simply because of the costs involved with the latter option.

In terms of how even part time services from a BSP might be paid for, I envision a dedicated good governance fund administered by a state arts council. If the arts council can’t find a source willing to specifically fund this, they might charge participating arts organizations a nominal fee and create a pool of money to pay a BSP.

The participating arts organizations could then choose from among a number of available board service providers.

We Need To Stop Optimizing Our Synergies

August 4, 2014 by Joe Patti

Yesterday, I was speaking with a friend who was learning English as a second language. I don’t remember which word it was exactly, but we got on the subject of corporate speak, the nigh-meaningless terminology that businesses use to recast their activities as something impressive sounding.

I ended up sending her a link to Weird Al Yankovic’s recent video, “Mission Statement” which makes fun of corporate speak.

I let her listen to Weird Al sing about synergies, operationalizing strategies, monetizing assets and other esoteric phrases set to “Suite Judy Blue Eyes,” preparing to be asked what the heck those words meant.

As I waited, it suddenly occurred to me that my hopes for simplified grant reports where non-profits honestly reported the results of the project rather than claiming everything went as well or better than planned, were probably impossible.

As long as for-profit companies are using this self-aggrandizing language to talk about themselves, non-profits are going to be expected to mimic them to some degree to provide the appearance of competence and effectiveness. Most granting entities are either the non-profit arm of companies employing this blather or are foundations with boards comprised of people who work for these companies. For them, use of the latest corporate speak buzzwords are indications of organizational health.

It also occurred to me that the difficulty in attracting audiences from all strata of society might be rooted, in part, in the need to employ an esoteric vocabulary. The need to sound impressive for funders probably influences marketing text. .

But it doesn’t mean much to the audiences you wish would show up.

Certainly there are plenty of other factors which might inhibit a decision to attend an event. Programmings choices that don’t resonate with the interests of local audiences being one.

However, I wouldn’t be surprised to learn that new employees who understand how to communicate in a way that interests desired community demographics find themselves pressured either overtly or subliminally over time to use more “polished” language.

I’m afraid that just as like death and taxes, the influence of corporate speak is going to persist until we can actualize a paradigm shift by distilling our core identities into a bleeding edge proactive client centric modality.

Best Leaders Are Internally Motivated

July 29, 2014 by Joe Patti

There was a post on the Harvard Business Review blog site about a recent leadership study – Why You Lead Determines How Well You Lead.

According to the study, people with an internal motivation to lead are more effective than those with external motivations. More surprising, a person who has a mix of internal and external motivations, does very poorly.

“As one might predict, we found that those with internal, intrinsic motives performed better than those with external, instrumental rationales for their service — a common finding in studies of motivation. We were surprised to find, however, that those with both internal and external rationales proved to be worse investments as leaders than those with fewer, but predominantly internal, motivations. Adding external motives didn’t make leaders perform better — additional motivations reduced the selection to top leadership by more than 20%. Thus, external motivations, even atop strong internal motivations, were leadership poison.

Many believe that the best way to influence behavior is to incentivize it, and such external incentives certainly work with lab rats. In our study, however, adding external incentives clearly did not improve leader performance.”

and later

“If those we seek to develop as leaders adopt external justifications for leading well — such as an increase in shareholder value, better pay or perquisites, or increased profits — they are likely to be less successful as leaders in comparison to those who seek to lead for more internal, intrinsic reasons alone.”

If you have been reading my blog for awhile, you probably can see where my mind is going here. These results made me wonder if non-profit leaders might not make the most effective leaders since internal motivation for doing the job is all but given.

Now remember, effective leader doesn’t necessarily equate to successful. This is a “if you are so smart, why ain’t you rich” situation. Non-profit organizations are notoriously underfunded and lack the resources to achieve the success they aspire to. Not to mention many are pursuing work which others won’t because there is no profit to be made.

Likewise non-profit leaders may make really stupid choices because there was never any time to properly develop and cultivate them throughout their careers. (Not that this type of grooming has kept their for-profit colleagues from making stupendous mistakes either.)

Yes, I am flirting with suggesting that for-profit corporations pull something akin to the movie Trading Places consider looking for effective leaders in non-profit organizations (sans the whole bet thing).

Yes, this regrettably will take talent out of the field, but it would put them in a place with greater resources to provide their leadership skills with more impact. Without maximizing shareholder value as a central goal, the general business environment may shift for the better. Though that might be as big a fantasy as the movie.

http://www.youtube.com/watch?v=ZjDbJQKDXCY

Do You Remember Why We Wanted To Build This Place?

June 25, 2014 by Joe Patti

CityLab (formerly Atlantic Cities) featured an article today titled, “Why Cities Should Be More Skeptical of New Cultural Centers and Expansions,” based on some findings of a book due to come out in 2015.

As I read the article, the findings sounded increasingly familiar. Indeed, the authors are the same people who wrote the Set In Stone study that came out two years ago. I posted about it here and here if you are interested in a summary.

The study looked at the impact of cultural arts facility construction/expansion to see if they ended up achieving the expected results in terms of attendance and economic impact. They also looked at what sort of impact the construction had on other arts organizations in the vicinity.

While both were interesting, I found the result of the latter investigation more intriguing because arts organizations really are never clear about who their competitors are, how much of a impact they have on each other and whether the net effect is positive or negative. Since so many of the results reported in Set In Stone were based on perception, I would really be interested to read the book to learn if the authors had been able to verify them with hard data.

The CityLab article reports that there are a number of reasons why cultural facility construction can often be detrimental to municipalities. Among them,

“The types of leaders who provide the passion and drive to build structures of this sort [major performing arts centers] are successful men and women who are accustomed to relying on their own experience and judgment,” the book reads. “They depend on what they might describe as ‘inside knowledge’—knowledge gleaned from their own experiences, and those of their collaborators’ experiences.

“What tends to be absent in their thinking, however … is ‘outside knowledge,’ such as what statisticians refer to as ‘the base rate’ regarding the distribution of projects that did not go as planned,” the book continues.

Other traps that civic leaders fall into include hindsight bias and consistency bias: People’s memories about decision-making for projects tends to change over time, and people tend to revise their memory of the past to fit present circumstances.

“While the Philadelphia Orchestra originally embarked upon a building project for the purpose of constructing a new single-purpose concert hall, the opportunity to make it an economic development anchor in downtown Philadelphia partly persuaded its leaders to morph the idea into something entirely different—a PAC [performing arts center],” the chapter explains. “Today, the reason for building the Kimmel Center is frequently remembered by its community as being to revive a distressed former industrial city’s downtown.”

The example of the motivational drift for the Kimmel Center seems to parallel the ever shifting rationale for the value of the arts- It makes kids better at math; makes an economic contribution; is a force for gentrification; attracts creatives – when the initial purpose was simply for the sake of the art.

I am sure this drift isn’t just limited to cultural facilities construction. I bet sports arena construction is sold in a similar manner. It is just a particularly good illustration that whether you want to fund a performance or the construction of a space to perform it in, the best, most true justification isn’t going to be persuasive enough for all those whose support you need.

Secret Art In Minnesota

June 4, 2014 by Joe Patti

The always cool people at Springboard for the Arts (and that isn’t a commentary on Minnesota weather) recently got to do a “TV Takeover” where they explained how they serve the artistic community in Minnesota. They chose the theme of “Your Secret Art” to emphasize the idea that a lot of people have artistic talent which may not immediately be apparent.

There were two parts of the show I liked, both dealing with “artists taking care of business.” At the 51 minute mark, artists talk about pricing their work and their initial reluctance to ask to be paid or to charge what they were really worth.

The artists that were interviewed note that it is natural to make the mistake of undervaluing your work, but that you need to quickly move past that. Pricing is not only based on your time and materials, but a result of doing market research and understanding how similar work is valued.

This was an important topic for artists and one that is rarely broached in interviews with artists about their careers.

The other part of the show I liked was at the 24 minute mark where artists talk about their work as a business. What really grabbed my attention was the statement made by Uri Sands of TU Dance in answer to the noisome assertion that art is not a profession because you love doing it. Sands says if you have a talent, you have a responsibility to your gift. It requires enormous work whether you are a mathematician, athlete or dancer.

Art requires more of him because he does love it. If he didn’t care, he wouldn’t have to think about it and could clock in/clock out. But because he loves it, thinking about dance inhabits all his free time as well.

I thought that was a fantastic answer because it is so absolutely true that artists often aren’t easily able to stop investing themselves in one part of their lives come 5:00 pm.

Visual artist Anna Metcalf talked about how valuable it was to refer to creating ceramics as her job. She spoke about having a business plan which helped her establish priorities and also legitimized her art practice as a business. It sounded to me as if this might provide her with a little self-discipline, but there also seemed to be a subtext that the frame work might help keep others from viewing her work as a hobby.

I couldn’t quite catch the name of the third artist interviewed in this segment. Even though she was surrounded by puppets, it sounded as if her practice encompassed many disciplines. Since I just wrote about mentors yesterday, her comment that when was was younger she assumed mentors would find her grabbed my attention.

She said that she now recognizes the need to seek out and cultivate people to be mentors. This made me realize that yesterday’s post really didn’t touch on the idea that you could have multiple mentors at anyone time and that it can be smart to cultivate relationships now with people who could potentially be a mentor in the future.

A corollary to the idea that not everyone is suited to be mentor is that not everyone is suited by knowledge or temperament to be a mentor at every stage of your career. You will outgrow some mentors and grow into others.

Springboard for the Arts and the people they serve are doing some pretty interesting things. I can be worth the time to watch the whole thing.

What Do You Know About Your Emails?

June 2, 2014 by Joe Patti

If you are like me, you may be taking time this summer to re-evaluate some of your practices like email marketing. Last year, I came across an interesting set of email marketing myths.

Now I know, these sort of articles are pretty common so I did a search for similar stories and actually found this list popped up fairly frequently. That must mean this list of myths is true…or that they have a really good email mailing list. In either case, they must know what they are talking about, right?

Two of the “truths” that caught my eye were for myths 2 & 3 – 85% of opens happen within two days of receiving an email, but only 21% of purchases happen during that period. 32% happen two weeks after. And “20% of your annual openers do so after being inactive for 6 months.”

First, let me say for the record I can’t believe any company is actually ceasing to send me emails after I fail to respond or take action for 6 months. It is hard for me to believe any company thinks they should give up after 6 months and actually does it.

That said, the basic idea that people are engaged by your communication and your organization long after you might assume they are hearkens back to the research presented by Andrew McIntyre a few years back that indicated people often felt a close association with a company/arts organization even after 2-3 years of inactivity.

This is just another bit of evidence from a different quarter that reinforces the concept of not giving up hope that a person will continue their participation in your activities.

The facts for myths 4, 5 and 6 were interesting to me. The fact that fewer than 1 subscriber in 2000 will tag an email as spam was interesting me. I don’t think I ever tagged a non-Viagra related email as spam myself, but I always worry that recipients might be liberal with the spam button. I am less concerned now.

I was also surprised to learn “sending four emails a month instead of one doubles the number of consumers opening one or more emails..” Post author Mark Brownlow explains,

“Don’t get misled by changes to rates. All things being equal, if you double your frequency and average click rates drop 20% that’s a win.

1000 mails/month at 10% CTR = 100 clicks

2000 mails/month at 8% CTR = 160 clicks

The converse is also true. If you remove 60% of your list and see click rates double, you’re actually losing.

1000 mails at 10% CTR = 100 clicks

400 mails at 20% CTR = 80 clicks”

In responding to myth 6 about shorter subject lines being better, Brownlow encourages people focus on being efficient with subject lines, but give yourself permission to use whatever words are necessary to make your impact. The infographic presents some interesting data about subject lines – less than 60 characters increase opens, but those over 70 characters increase clicks.

Of course, as they say, your mileage may differ and you really need to pay attention to the characteristics of those you are reaching. Brownlow cautions in the comments section, “…Many recommendations are based on scenarios or averages that may not fit your particular situation. As you say, testing is important…”

If you are apt to dismiss the data in the infographic as not matching your experience, then you can’t cleave to the myths as being true in turn because they aren’t likely to be true for your situation either.

Even after decades of using email, it is extremely difficult to calibrate its use as a marketing tool because the way people use the technology is constantly evolving.

I am keeping one eye turned toward Adam Thurman over at Mission Paradox blog. Last month, he was looking for guinea pigs to test and provide feedback on his email marketing class. I am interested to see what he may have developed.

Do You Underestimate The Customer’s Journey?

May 7, 2014 by Joe Patti

Inc Magazine recently had an article of 100 Great Questions Every Entrepreneur Should Ask. As you might imagine, there was a lot in the list that have relevance to non-profit organizations.

Some deal with topics that continually arise in conversations about the arts like relevance; allowing a pursuit of funding to divert the organization from its mission; and what metrics are being used to define success.

1 How can we become the company that would put us out of business? -Danny Meyer, CEO of Union Square Hospitality Group

2 Are we relevant? Will we be relevant five years from now? Ten? -Debra Kaye, innovation consultant and author

52. If our company went out of business tomorrow, would anyone who doesn’t get a paycheck here care? -Dan Pink

6. What trophy do we want on our mantle? – Marcy Massura, a digital marketer and brand strategist at MSL Group
Massura explains, “Not every business determines success the same way.Is growth most important to you? Profitability? Stability?”

7. Do we have bad profits? -Jonathan L. Byrnes, author and senior lecturer at MIT
Byrnes explains, “Some investments look attractive, but they also take the company’s capital and focus away from its main line of business.”

8. What counts that we are not counting? -Chip Conley, founder of Joie de Vivre Hospitality and head of global hospitality for Airbnb
Conley explains, “In any business, we measure cash flow, profitability, and a few other key metrics. But what are the tangible and intangible assets that we have no means of measuring, but that truly differentiate our business? These may be things like the company’s reputation, employee engagement, and the brand’s emotional resonance with people inside and outside the business.”

Others focus on customers/audiences.

10. Are we paying enough attention to the partners our company depends on to succeed? -Ron Adner, author and professor at Tuck School of Business
Adner explains, “Even companies that execute well themselves are vulnerable to the missteps of suppliers, distributors, and others.”

17. Which customers can’t participate in our market because they lack skills, wealth, or convenient access to existing solutions? -Clayton Christensen, author, Harvard Business School professor, and co-founder of Innosight

21. Who, on the executive team or the board, has spoken to a customer recently? -James Champy, author and management expert

32. Do we underestimate the customer’s journey? -Matt Dixon, author and executive director of research at CEB
Dixon explains, “Often, companies don’t understand the entirety of the customer’s experience and how many channels may have already failed them. They don’t understand that the customer goes to the website first, pokes around but can’t find the answer to their question, and then tries to start up a chat with an agent, only to get frustrated by the delayed response. Only then do they go to the Contact Us tab and call. From the company’s perspective, the call is square one. The customer sees it as, you’ve already wasted 15 minutes of my time.”

62. Do we say “no” to customers for no reason? -Matt Dixon
You may have created your customer policies at a time when you lacked resources, technology wasn’t up-to-snuff, or low service levels were the industry norm. Have those circumstances changed? If so, your customer policies should change to

Number 17 needs no explanation. I actually was somewhat reassured by the fact that for-profit business faced the same challenges about education/skills, access and wealth that non-profit arts organizations do.

I was drawn to #32 because it is so easy to be unaware of all the hurdles a customer faces when dealing with you.

Number 62 also strongly grabbed my attention because it emphasizes the need to constantly revisit and revise your policy. It had particular significance to me because I recently discovered that a practice I assumed was due to technical limitations was erroneous, and was in fact just a matter of history and habit. As a result, we will be selling new subscriptions two weeks earlier this year than in the past.

Number 10 I read both as not giving customers what they need to have a successful experience, but related to partners and colleagues as well. Are you paying attention to the health of businesses you depend on as well as that of other arts organizations in the community? Even if they are doing fine, could more clearly communicating your needs to them lead to a more efficient outcome for both of you? Could mutually beneficial partnerships result, strengthening both organizations?

Some of the question were focused on strengthening your company internally in terms of thinking, planning and self/employee development.

3. If energy were free, what would we do differently? -Tony Hsieh, CEO of Zappos
Hsieh explains, “This is a thought experiment to see how you would reconfigure the business if you had different resources available or knew that different resources would one day become available. Another question might be, what if storage was free? Or what if labor costs half as much or twice as much?”

9. In the past few months, what is the smallest change we have made that has had the biggest positive result? What was it about that small change that produced the large return? -Robert Cialdini, author and professor emeritus of marketing and psychology at Arizona State University

16. If no one would ever find out about my accomplishments, how would I lead differently? -Adam Grant, author and professor at Wharton

22. Did my employees make progress today? -Teresa Amabile, author and Harvard Business School professor
Amabile explains, “Forward momentum in employees’ work has the greatest positive impact on their motivation.”

37. Am I failing differently each time? -David Kelley, founder, IDEO

The last one about embracing failure is a familiar topic of discussion even in the arts community today.

These last few (though there are many like them in the article) remind business leaders to be introspective of themselves and their companies. It is easy to overlook things like the change that made the biggest impact, or even attribute the impact to something else unless you stop and think about the true source. Certainly paying attention to progress of employees is one way small changes can manifest as big impacts over the course of a few months.

Perhaps the toughest of these last handful of questions is #16 because it challenges you set aside your ego in order to be a more effective leader.

The Tao of Data

May 6, 2014 by Joe Patti

Following a little on the theme of my post last week about being well-rounded, The Drucker Exchange recently had a post about balancing quantitative and qualitative mindsets.

Because there is such a focus on the quantitative these days with people encouraged to enter STEM fields and schools’ value being judged on the basis of test results, the arts community has been pushing back by touting the value of the arts. Though often it is in the context of these same quantitative measures: test scores, economic impact and earnings.

The Drucker Exchange post, as well as the Wall Street Journal column by Thomas Davenport that inspired it, note that like the peanut butter and chocolate of a Reese’s cup (my metaphor), quantitative and qualitative are most effective together.

Despite years of work at providing both knowledge and quantitative analysis to decision-makers, there is scant evidence that we have really improved decisions—so we have our work cut out for us.

At heart I think the historical separation of knowledge and numbers people is a “Two Culture” problem, made famous by C.P. Snow. Knowledge management people are humanities/liberal arts types, and analytics people are math/science types. We need to get them together, however. Almost all key domains of business–including customer insights, understanding the broader business and economic climate, and various approaches to performance improvement—involve both qualitative and quantitative content. The best decisions and the best organizations will make effective use of both.

In my post last week, I suggested that the scientists quoted in the Salon article felt their scientific investigations were enhance by their artistic pursuits. Peter Drucker apparently said much the same thing, but observed the same is true for someone in the humanities in relation to science.

“We will have to demand of the scientifically trained man that he again become a humanist; otherwise he will lack the knowledge and perception needed to make his science effective, indeed to make it truly scientific,” Drucker warned. “We will have to demand of the humanist that he acquire an understanding of science, or else his humanities will be irrelevant and ineffectual.”

From time to time, I also write about what value arts organizations might bring to businesses. Thomas Davenport talks about how people with the qualitative mindset can help the analytically minded tell a clearer story about their data.

Knowledge people are good at dealing with text, and some would probably be able to extend their skills into text mining and analytics. Knowledge management practitioners are also good at capturing insights, and there are many analytical assumptions and results that are never recorded. It’s also likely that some good knowledge analysts could help quants “tell a story with data,” which is something almost every organization is looking for these days.

The companies Davenport is talking about would employ such people full time so it wouldn’t be an opportunity an arts organization could do on the side. Though it certainly points to possible career opportunities for those with a liberal or fine arts background.

Something along these lines could provide a coaching/advisory opportunity on a smaller scale for arts organizations. Ultimately, thinking about how you can help a business tell the story of their data will probably help a non-profit organization do a better job telling the story of their own data on grant applications and marketing materials.

Arts organizations are probably all too close to their own data and tend to see grant reports as a chore. Helping a company in an unrelated field tell their story for an entirely different purpose could cause a shift in perspective that increases their effectiveness in talking about themselves.

Boards! What Are They Good For?

April 9, 2014 by Joe Patti

Some interesting thoughts on the purposes of boards in the blogosphere today. Laura Zabel makes some “bored assumptions” about the primary purpose of boards suggesting that passion about the mission should come first with fund raising being a distant second or third or fifth…

“I’ll be blunt here: if you’re not thinking about how your board represents your community then you’re not building a relevant organization. When we are looking for new board candidates at Springboard there are two criteria:

-do you love and understand the mission deeply?
-will you energetically represent the organization to your community and your community to the organization?

Swim Pony Performing Arts artistic director Adrienne Mackey says much the same thing in a post of her own today.

“Which means that were I to incorporate the mission my board would be responsible for is “To make Adrienne’s work the most Adrienne it can be.”

But Mackey, whose organization is not incorporated as a non-profit and who states from the outset “I am generally anti non-profits for the majority of content generators, especially for small ensembles and individual creators,” asks

“Are there any artists who, if given the choice, would actually want to keep a board of directors if they didn’t have to? I know that many of my peers have talked to me about learning to find meaning and usefulness and sometimes even joy in the people they’ve invited to be part of their non-profit board. But if they weren’t required to find a way to live with this set up, would they still do it?”

She asks this predominantly in regard to companies that exist to promote the work of a single artist rather than in the service of promoting or curating types and genres of art or to provide “a habitat for artists to plug into.”

The basis of this is the belief that (my emphasis):

“..artists should get input from the outside about how their work is best made and how it might be financially sustainable and responsible. But at the core, I don’t agree that the final responsibility for a creator’s product can be located outside of the creator.”

For me, both posts are further evidence of the sentiment that has been simmering over that last few years that the current structure needs to be replaced. Adrienne Mackey makes a good case for situations when you should not view non-profit status as the default and only choice.

We have seen the appearance of Benefit Corporate structure in an increasing number of states over the last few years as a way for companies to effect positive social impacts. Readers of my blog know that I am intrigued by the idea of arts organizations being created with expiration dates.

But I think there is just as much validity in Laura Zabel perception that there is nothing necessarily wrong with the current structure, but the that assumptions and dynamics of board relations need to be altered.

[hr]

Today’s post title inspired by Edwin Starr. I should note, I am not advocating for the dissolution of boards a la the “absolutely nothing” lyric. It is often difficult to think of a title for my posts and it was just too good a reference to pass up.

Price and Value

March 24, 2014 by Joe Patti

Seth Godin recently made a post that provides a good summary of how value influences the way consumers view price.

“It’s too expensive,” almost never means, “there isn’t enough money if I think it’s worth it.”

Social entrepreneurs are often chagrined to discover that low-income communities around the world that said their innovation was, “too expensive” figured out how to find the money to buy a cell phone instead. Even at the bottom of the pyramid, many people find a way to pay for the things they value.

[…]

Often, it actually means, “it’s not worth it.” This is a totally different analysis, of course. Lots of things aren’t worth it, at least to you, right now. I think it’s safe to assume that when you hear a potential customer say, “it’s too expensive,” what you’re really hearing is something quite specific.

There is a sentiment commonly expressed around arts organizations, especially ones that are trying to attract college age attendees, that college students who say a ticket is too expensive will generally spend twice as much on beer on the same Saturday night. While a performance and a beer are transitory experiences, everyone knows beer is more transitory of the two. (The old saying, you don’t buy it, you rent it.) But, of course, it is the social environment that accompanies the beer that people value.

Aid and Expectations

March 17, 2014 by Joe Patti

There was a TED Radio segment that aired back in October that hit so many of the conversation points in the arts today: recognizing failure, serving communities and funder priorities.

The topic was aid work in Africa. Italian aid worker Ernesto Sirolli reveals that pretty much every aid effort in Africa has failed. Some failures are attributable to arrogance of thinking you know what the solution is, but are equally attributable to the fact that no one will admit their failures, leaving others to replicate them.

SIROLLI: Every single project that we set up in Africa failed, and I was distraught. I thought, age 21, that we Italians were good people and we were doing good work in Africa. Instead, everything we touched we killed.

RAZ: How did every single project fail?

SIROLLI: And they still do. See, the first reaction was, let’s not tell anybody we made a mistake. Let’s not tell anybody about this project. I really thought that it was one bad project that will never be repeated, which, I think, is what the Americans in the Peace Corps are thinking right now. That they are in a bad project, but it’s unique. So what they do, they don’t tell anybody what they’ve done because there must be lots and lots of lot good projects out there.

But if they had the chance to go and find out what their colleagues are doing around Africa, they will discover that, in fact, the norm is failure.

What caught my eye was the assumption by each group that their failure was unique based on the assumption everyone else was succeeding. Not surprising since everyone was reporting successes.

Sirolli says that everyone sent back reports to the home office talking about how great things were going when everything was actually going to hell. While the rosy reports were submitted to one office, another letter was sent to him begging him to come help the distressed aid workers.

I think the arts world faces a similar problem, it is just that our budgets are a bit smaller. The failures get a lot more publicity though, if you take a look at all the orchestra negotiations that have broken down and the failure of companies like City Opera in NYC.

Actually, that is not really accurate. We only know the very end results in each of these cases. We don’t know enough about the failures that lead to these situations to learn from them. There isn’t much to be learned from “Don’t Run Out of Money.” A little more transparency and frank discussion may be helpful.

When Sirolli talks about the Enterprise Facilitation system he invented, I felt like his approach was both a lesson to arts organizations and funders.

SIROLLI: … And I invented the system called Enterprise Facilitation where you never initiate anything, you never motivate anybody, but you become a servant of the local passion. The servant of local people who have a dream to become a better person. So what you do, you shut up, you never arrive in a community with any ideas and you sit with the local people. We don’t work from offices. We meet at the cafe. We meet at the pub. We have zero infrastructure. And what we do, we become friends, and we find out what that person wants to do…

…The passion that that man has for his own personal growth is the most important thing. And then we help them to go and find the knowledge because nobody in the world can succeed alone. The person with the idea may not have the knowledge, but the knowledge is available. So years and years ago, I had this idea – why don’t we, for once, instead of arriving in a community to tell people what to do, why don’t, for once, listen to them? But not in community meetings. What we do, we work one-on-one, and to work one-on-one you have to create a social infrastructure that doesn’t exist.

Art organizations can probably take a cue from him about learning about the community by hanging out in cafes and talking to people rather than holding community meetings. Both funders of arts organizations and the arts organizations themselves might find value in simply helping people to connect their passions with the knowledge they need to realize their passion.

Any entity with resources to offer will probably find it difficult to just step back and not try to motivate people or impose their ideas on the people they hope to help. I am sure Sirolli and his people had that problem when they started. It is extremely difficult to surrender your ego and expectations, especially when you are bringing money to the table.

But the thing is, that is exactly what the best actors are able to do. They set aside their expectations about the way a scene should go and open themselves to the infinite possibilities that might occur. That way if a line is flubbed or delivered differently than it has been in the past, they can respond appropriately to the situation.

Bad actors chug on heedless of unexpected change or are caught short by it. In either case, they call attention to the problem.

This isn’t the best analogy because Sirolli’s people don’t react in order to serve their motivations the way actors do. Still, his people need to strive toward the same goal of suspending judgment in the same manner as actors do.

Imagining Doing Many Things With The Rest of Your Life

January 22, 2014 by Joe Patti

It is something of a trope that when you are a teenager without a lot of work experience looking to get a better job, you get creative about how you describe your past experience, claiming to have “coordinated the comfort and appreciation of over 1000 customers daily” when your job was to keep the restrooms clean.

After writing my post yesterday about artists doing a better job of communicating their value, I remembered a post on the Theatre Communication Group (TCG) website this summer about how artists already possess many of the skills needed to be entrepreneurs.

At the time, some of the comparisons seemed a little facile and the same sort of stretch teenagers make to sound more skilled.

For example, the improvisation classes we take develop a sensitivity to imagination and impulses. We learn how to say, “Yes” and to follow impulses without fear, judgment or resources. We find ourselves acting with others in highly bizarre and complex scenarios that we have to “act” our ways through. Entrepreneurs, similarly, often find themselves in such situations and must rely on quick thinking, problem solving and the following of impulses.

Further, the storytelling skills we learn as performers, play well into branding ourselves as an artist, entrepreneur or arts business. The research skills we use to research a play and character can simply be repurposed to research one’s market and competition. Our understanding and experience in collaboration aids us in building a culture around creative businesses that represents values: personal, professional, political, artistic, etc. Just like we cast plays, entrepreneurs hire employees.

After reading over the report assembled by the Brooklyn Commune, I realized that the only reason I felt like it was a stretch is that I haven’t really come across many arts people who are interested in applying the skills they acquired in other areas. I have to include myself in that statement. While I look for new opportunities on behalf of my organization, I generally have no inclination to start a business or apply those skills on behalf of a company in another industry.

I think this gets back to the sentiment many of us hear when we begin to embark on a career in the arts, “if you can imagine yourself doing anything else for the rest of your life, pursue that instead.”

What might be inhibiting some of the progress in the arts is that we have so little desire to do anything else that we don’t give a lot of consideration to how our skills might be of practical use outside our field.

One of the reasons the arts community is having difficulty communicating their value to the public at large may be due to never thinking, much less talking, about how the skills we have cultivated are of use anywhere else, because we have no inclination to employ them anywhere else.

When I went back and re-read the TCG posting from the perspective that people would be intentionally trying to apply the skills they have gained to be entrepreneurs, I became more convinced by the idea of the skills being eminently transferable.

I have written a few posts before about how classes and training in the performing arts confer these skills to students, but in my mind I always pictured these students as people who always intended to pursue careers in other areas and are picking up useful skills to transfer to those jobs.

I never really considered someone who had had a successful career in the arts over 10-15 years deciding they would parlay that experience into starting a company that provided logistical support to construction sites.

Again, because we aren’t supposed to imagine doing anything else, why would someone who was successful want to do anything else? But with a partner with construction industry knowledge, an arts person would already have the skills to sell the services, assemble and direct project teams and find creative solutions to problems.

The simple truth is, while we learn a lot of important skills during our arts careers, we don’t acquire all the requisite skills after we start pursuing an arts career. We bring a lot of skills from other jobs and interests in with us.

After I ran my first music festival, I remember the marketing director asking me where I learned to be so highly organized, anticipate problems and develop plans. She wondered if any of my previous jobs had included organizing large outdoor events before.

The truth was while I brought many useful skills from other jobs, none of them directly prepared me for that experience as well as my mother had. Since we lived so far from the supermarket, she used to have us kids make monthly meal menus and shopping lists.

We would go tent camping a few hours away back when you were lucky to have a running water tap nearby much less power. You learned quickly that if you didn’t pack books or games to keep you occupied or forgot to pack the right clothes, it could be a long, boring miserable week.

If you do intend to make a career in the arts, you really still do need possess the drive that comes from a mindset where you can’t imagine doing anything else because it ain’t getting any easier.

Or maybe that is the wrong approach and will just maintain an long too myopic vision.

Since the definition of what it means to participate in artistic pursuits is expanding, the concept of what constitutes a successful artistic career probably also needs to expand—as will the concept of what a person trained in the arts is capable of accomplishing in other industries.

While not all people who work hard pursuing their art becomes highly accomplished or successful, I do believe that it takes a great deal of effort and dedication to become an accomplished exponent.

If nothing else, you need to surmount all the missteps and failures that are part of the process. This has often meant devoting so much time and energy in the pursuit and practice that it doesn’t leave much time for other jobs. But maybe we need to think more about how working in other areas can provide skills to benefit our artistic practice.

A pianist isn’t going to hone her skills by typing hours a day the way a visual artist can learn about composing images in a space while working as a graphic designer. However working in the trust and estate planning department of a bank might provide the pianist with the ability to speak to potential donors about their giving plans and help her better understand how to market her career.

Know Who You Are Dealing With

December 30, 2013 by Joe Patti

In about two weeks I will be attending the Association of Performing Arts Presenters conference in NYC. I will be hosting a discussion panel, but my primary objective is to learn about different artists that might potentially perform in my space and make contacts with different artists’ agents.

It occurs to me to toss out a cautionary tale about being very, very careful about verifying that the people with whom you are working to arrange a performance are, in fact, the actual artist’s representative.

When I was working in Hawaii, the University of Hawaii at Manoa Athletics department decided they wanted to present a fund raiser featuring Stevie Wonder. They sent $200,000 to people who were not Stevie Wonder’s agent who subsequently took the money and ran off. The FBI ended up getting involved.

Given the scrutiny we faced to even get a $2,000 check cut, those of us working for the university in the performing arts wondered how so much money ended up getting transferred in the first place. Second, even if they didn’t think to ask those of us who handled performing arts contracts for the university, we wondered why none of the other prominent promoters in the state weren’t consulted. Any of us could have told them they were dealing with the wrong person.

However, I will admit that for someone who is inexperienced, it is difficult to discern who Stevie Wonder’s agent is. Many artists have their agent listed on their website, but Stevie Wonder doesn’t. My suspicion is that this keeps people who aren’t seriously prepared and qualified to present him from deluging the agent with requests. Anyone who is serious about presenting him will know how to identify his agent, Creative Artists Agency. (CAA)

That lack of information provides an opening which allows other people to take advantage. Even though I don’t engage artists who command $400-$500,000, I know CAA is one of the few agencies large enough to handle the business of someone like Stevie Wonder. But if you search the internet for “Stevie Wonder agent,” you will find 6-10 listings of people offering to arrange a concert for you. If you didn’t know CAA was his agent, which would you choose? CAA is the first search result, but there are two paid placements that come in above them.

Most of the other companies listed will likely turn around and contact CAA on your behalf to arrange for Stevie Wonder’s performance, taking a cut themselves. This isn’t to say these middlemen are just skimming a piece of the action. There are many that will add value to the exchange and handle the details you don’t have the resources to deal with yourself.

Some might take the money and run.

There are organizations that work to apply a code of ethics to artist booking like North American Performing Arts Managers and Agents (NAPAMA), but plenty of wholly legitimate agents are not members. And the general layperson never knows if these trade organizations are legitimate themselves or just created to provide a semblance of legitimacy.

Probably the best guard against getting cheated is good research and relationships. As I said, many artists will have their agent listed on their website. If they don’t some careful research is in order.

This is especially true if you are partnering with another entity who is going to help you mount your event. The more expensive the artist is going to be, the more you want to work with someone trustworthy who has experience presenting artists of that caliber.

The problem is, if you don’t have a close relationship with such a person, you are basically left assuming that the person you do trust to vouch for them actually knows enough to make that judgement.

The wisest course is get experience presenting events, working your way up to larger and larger names to get the experience. But many people don’t plan to present shows frequently enough to acquire this experience.

Deciding you want to invite someone who regularly commands $50-100,000+ for your fundraiser or anniversary event, having never presented such a performance before and not working with an entity that has, is a recipe for disaster. There are going to be basic expectations about the experience that you are entirely unaware of and unprepared for.

And really, the same is true for artists with $10,000 fees. There will just be exponentially more people involved at the higher fee and the problems will be that much more public.

Wherein I Hallucinate About Internships

December 16, 2013December 16, 2013 by Joe Patti

I recently misread the title of a post on Museum 2.0. But in that second of misapprehension, my brain flooded with assumptions about the subject of the post. I misread “A Shared Ethics for Museum Internships” to be something like “Ethics for Shared Museum Internships.” In that moment, I thought shared internships was a great idea and had a vision for how it would work.

Some of these assumptions were made in the context of the growing discussion of problems with unpaid internships, most recently an quoting former Sleep No More interns as saying there wasn’t any educational benefit to the experience.

One thing articles about unpaid internships have focused on is the idea that the experience is supposed to be educational and of no direct benefit for whomever the intern is working. Now the best information I have right now is that these guidelines don’t apply to non-profit and public sectors. But there are rumblings that this may be changed. And there is also the issue of just because you can use an intern in the place of a staff person, doesn’t mean you should.

What I thought the Museum 2.0 post was going to suggest was trading interns between companies, particularly between for- and non-profits. I had this immediate vision of interns at a bank working in a museum and the museum intern working in a bank for a few weeks. The benefit being that the future banker would have an understanding of arts non-profits and the future museum director/curator would gain insight into what motivated banks to support arts organizations (or what motivates individuals to give as part of their bequest if the intern worked in the the trusts department.)

While it may not be entirely appropriate for a non-profit to “act like a business,” this type of experience can contribute to a better understanding of the points of view of board members who are business leaders by future non-profit leaders, and those of non-profits by future business leaders and board members. Miracles probably won’t result from a few weeks spent interning in a different company, but it shouldn’t impede things too badly either.

Moments later, I realized what the real title of the piece was, but my initial impression still seemed like an interesting idea. Even if you didn’t do an internship trade, placing an intern to work for a week at the company that did your brochure printing or the hotel that put your performers up, would give an intern a better understanding of the work done by the close partners of the organization.

A few years down the road, the intern might be in a position to propose an arrangement that is mutually beneficial to both the non-profit and the commercial partner that ends up bringing them closer together. A closer bond would also be the hopeful long term benefit of the intern swap I initially mentioned. Once the interns had reported on their experience and moved on, hopefully the cooperating businesses and non-profit would feel a continuing respect and understanding of each other.

Of course, it can be hard work to arrange all these details. It is hard enough to ensure that the experience at your organization is meaningful and doesn’t relegate the intern to copying and answering the phone, much less to provide the same experience at other work sites. But then, the intern isn’t really supposed to be making a lot of copies during this period anyway.

Any thoughts about this, its viability and how it might be accomplished? I mean, essentially what I am asking is, since I already hallucinated the post into existence, does anyone want to write about Ethics of Shared Internships?

Info You Can Use: Save The Charity, Save Your Company

December 10, 2013 by Joe Patti

I loved this story on Non Profit Quarterly about a Maine restaurant which actually revived its business when it started holding all you can eat fundraisers for charities.

…the eatery thought of the weekly all-you-can-eat nights with suggested donations flowing to charity as a way to attract new customers. “It worked almost immediately and it revitalized the business,” Benedict said. “We would have gone out of business if we didn’t change the way we did business. Giving back is the first thing we did, and it worked.” She says that a total of $635,000 has been raised since 2009 for local charity organizations and individuals.

It is great to hear that a business saved itself by helping charities in the community. It could be a model for other communities and businesses.

However, the restaurant hit a snag when the state attorney general started to investigate whether it was licensed as a charitable solicitor.

My first reaction was disappointment because the restaurant was doing such good work, but the truth is that there is a lot of fraud and deception perpetuated by companies acting as charitable solicitors. So unfortunately, despite an abundance of good intentions, companies need to be careful about providing assistance to charities in a similar manner.

The Council of Non-Profits has a link to the first chapter of a book about the licensing required for charitable solicitation by 40 states. The chapter provides a good introduction to the issues involved and resources for finding out more about the requirements in your state. I was able to go right to the pertinent sections of my state code and find who is exempt from filing with a couple mouse clicks. (Unfortunately, it doesn’t appear the restaurant would be exempt in my state.)

Economic Impact Ain’t Everything

December 9, 2013 by Joe Patti

Drew McManus cautions a little today against putting a lot of stock in studies about the economic impact of the arts.

I had been thinking along the same lines because so many people were crowing last week about studies showing arts and culture had a $500 billion impact on the economy.

The problem is, between 1998-2008 the impact of arts and culture on current dollar GDP was between 3.5% and 3.7% of the economy. According to a piece from Pacific Standard, arts and culture has been hanging around at 3.2% of the economy since 2009. When you are talking 500 billion, each tenth of a percentage there represents tens of billions of dollars so a .3%-.5% difference adds up quite a bit of lost impact. (Though the report was measuring where things stood in 2011 we are talking about a 2 year “hang.”)

From some of the responses I was reading, it seemed like people thought this was the first time the economic impact of arts and culture had been measured. It does appear that the criteria and methods are more refined than in the past, so the number may be more accurate. But as Drew suggests, people have been attempting to measure economic impact of arts and culture for quite some time now.

And remember, often economic measurements aren’t always your friend and acknowledging their validity can be a two edged sword if someone else can claim bring equal or better results.

A recent opinion blog on the NY Times reminded me that when it comes to economic impact and earnings potential for arts and culture positions, it is important to note that the figures are a result of specific decisions being made:

Is the crisis rather one of harsh economic reality? Humanities majors on average start earning $31,000 per year and move to an average of $50,000 in their middle years. (The figures for writers and performing artists are much lower.) By contrast, business majors start with salaries 26 percent higher than humanities majors and move to salaries 51 percent higher.

But this data does not show that business majors earn more because they majored in business. Business majors may well be more interested in earning money and so accept jobs that pay well even if they are not otherwise fulfilling, whereas people interested in the humanities and the arts may be willing to take more fulfilling but lower-paying jobs. College professors, for example, often know that they could have made far more if they had gone to law school or gotten an M.B.A., but are willing to accept significantly lower pay to teach a subject they love.

Economic impact of arts activity could potentially be greater if more people choose to charge more (or it could be lower because it wouldn’t be as widespread.) Arts and Culture salaries could be higher if people held out for more money (but again, there might be fewer people employed in those areas.) Choices have been made in an attempt to provide more widespread access and because people have been motivated by considerations other than money.

(And by the way, salaries start to even out around mid-career. Note that liberal arts is tied with medical technology, theatre with health care administration, history with business administration, and philosophy is WAY above both of them.)

People may tell you that back in the old days, people stuck with a job no matter how awful it was instead of pursuing what interested them. That may be true to a degree, but this weekend my mother told me that when my grandfather was working in the garage at a car dealership about 4-5 miles from their house, he was unhappy and bounced back and forth between parts manager and service manager and would curse up a storm every night.

Then he got a job at West Point Military Academy in shipping/receiving in the early 60s, and even though it was 40 miles away which required him to get up earlier every day, she never heard him curse after that point.

Not only do I know that my grandfather couldn’t be the only one who did this, I have heard interviews recently with people who lived in towns with good manufacturing bases who talked about how easy it was to quit a job in the morning and have a new one by the afternoon.

People may characterize following your bliss and studying a topic that interests you as an irresponsible and effete decision, but it isn’t unrelated to decisions people have made in the past. There may have been a good many people who stayed in a soul crushing job all their lives, but that may have been more of a choice than a necessity.

This by no means ignores that there are other forces conspiring to place college educated people in low paying jobs. There is more involved in finding employment than choosing a field of study and embracing the realities of jobs in that field.

But the choice to accept a job at low pay also contributes to the job being low paying. Sometimes it is because there are few alternatives but to accept those jobs. Sometimes it is because the applicants concede the organization has important uses for that money.

Salaries and economic impact are not the sole measure of value of people and their labor. Good thing too because we probably all have more value as soylent green.

Using All The Parts of The Chicken

November 18, 2013 by Joe Patti

“Ordinary businesses have clear-cut yardsticks to measure their performance: profits, return on investment, stock prices. But what does high performance mean for a non-profit arts group? A bigger budget? A larger audience? A shiny new building?”

You have probably read something along those lines about the difference between for profit businesses and non-profits before. But when I read this at the start of a report about data collection that the National Center for Arts Research was conducting, a thought struck me.

I was wondering if much of the construction of new buildings and expansion of programs that strained the means of non-profit groups was motivated by a desire to provide some physical manifestation of the organizations’ successes. Non-profit arts organizations are frequently urged to run themselves more like a business and are governed by board members who work for businesses who use profits, stock prices and return on investment as a measure of success.

That provides some possible context for the situation at the Minnesota Orchestra which recently underwent a major renovation of the physical plant and then turned around and has tried to cut labor costs. A publicly traded company that reported building new facilities and cutting labor costs would be viewed as a success. Not so much with the Minnesota Orchestra.

It may be that the non-profit model was doomed once the ideal of increasing shareholder value was embraced by for-profit businesses. Even though they may intellectually understand the mission of the non-profit on whose board they serve, business people may unconsciously seek to apply for-profit values to the organization in an attempt to validate its work.

Number of people served each year may provide some degree of satisfaction, but no one seriously evaluates McDonald’s success as a business by the billions served sign out front. (In fact, I can’t remember if they still have the count on the sign. That is how much I pay attention any more.) That may not be a really compelling measure for most people.

Overhead, as a measure of effective use of funds has been increasingly recognized as a flawed metric. The deeper analysis being performed by the National Center for Arts Research may provide a solution because the data is synthesized in a manner more closely resembling a stock and bond rating.

Still, this is all relative to money. Non-profits aren’t supposed to be profligate spenders, but their goal isn’t to make money and these ratings are all essentially a measure of return on investment. Experimentation and an attempt at a little R&D is going to reflect poorly on you.

I spent the weekend trying to think if there was any other metric of value that could be use instead of one relative to money and I couldn’t think of one. Unless you can conclusively prove that people have a better life, test scores, job prospects, (all of which are pretty much tied to earning potential), for having met you, there really isn’t any measure of success that can be used as an alternative to effective use of funds.

The truth is, even if chickens were medium of exchange, someone would be probably be reporting if you made good use of all the parts or threw away the beaks.

So non-profit arts organizations are stuck with money as a measure. As much as I hate to have to do it myself, completing data collection reports like the Cultural Data Project is probably going to help the arts furnish evidence of their value.

I don’t imagine that it will ever prevent some arts organizations from feeling the need to provide visible and public proof of their success, but the rigor and benchmarks that can be established may satisfy many that the organization is quite effective at what they do.

The Founder’s Curse

November 6, 2013 by Joe Patti

We here at Butts In The Seats blog, (okay, me), are not afraid to admit when we may have been wrong. This summer, Elizabeth Schmidt, wrote a piece on Non-Profit Quarterly challenging the myth of the Founders Syndrome.

There have been times in the past when my posts have played into the notion that Founders tend to hold their organizations back in various ways. As Schmidt enumerates:

The label seems to be applied if one or more of the following symptoms are present. The first is a sense of grandiosity—that the organization is the founder’s, and it exists to serve his or her ego (or pocketbook). The second is an inability to delegate—poor management on the part of the founder. The third is an inability to make a smooth transition from the founder to new leadership. And the fourth is an unwavering dedication to the original vision for the organization.

Schmidt makes the common sense observation that you don’t need to be a founder to exhibit these characteristics and gives a few examples of non-founders who have damaged their organizations by manifesting them. She also notes that being normal human beings, not all founders possess these traits, nor do they suddenly become infected with these inclinations upon deciding to found a company.

She notes the inability to plan a smooth leadership transition is so widespread it is more of an organizational failing than attributable to the influence of a single individual.

The worst in Schmidt’s mind seems to be the fourth stereotype of not allowing the organization to evolve beyond the original vision.

“This symptom is particularly disturbing, however, because it has the potential to squelch necessary dialogue among the stakeholders of the organization. To say, as soon as a disagreement arises, that the party who conceived of the initial mission suffers from founder’s syndrome, severely handicaps that party’s standing in the discussion.”

Schmidt acknowledges that there is always some basis in truth to the anecdotes that form these generalizations about founders and it is likely that many organizations have encountered troubles for just these reasons.

However, she points the lack of research providing evidence that this is a particular problem for founders. The only study she found that attempted to collect empirical data concluded that there was ““considerable truth to some of the rumors and stories about founder’s syndrome.” However, Schmidt feels the following data does not support this assertion and is at best, inconclusive.

-Founder-led organizations tended to have smaller budgets.

-Term limits for board members existed in 31 percent of founder-led organizations and 49 percent of non-founder organizations.

-Eighty percent of founder-led organizations held at least quarterly meetings, compared to 87% of non-founder organizations.

-Three-fourths of the respondents in both groups thought either the executive director or the board chair was the most influential person during a board meeting, but founder-led organizations were more likely to say the executive director was the most influential.

-On the other hand, founder-led organizations were more likely to have reviewed the mission in the past year than organizations led by non-founders; they were more likely to attract full board participation at meetings, and they were more likely to set and mail the board agenda ahead of time.

I haven’t read the study she references, but on the face of the data, I would probably lean toward saying non-founder organizations employed better governance practices. Still Schmidt makes a strong argument about resisting the inclination to automatically dismiss a founder as the source of problems for a company and instead evaluate all elements potentially contributing to the organization’s weakness.

Founder or Flounder? Being An Employee Is Okay

August 27, 2013 by Joe Patti

Hat tip to Jari-Pekka Raitamaa who tweeted an article about mistakes people make when considering founding a tech start up. It occurred to me that the same basic advice could be given to people thinking about founding an arts company of some sort.

The basic premise of article by Jolie O’Dell, Stop founding! 10 signs you’re ‘employee material’ is that many would be founders need to get some significant experience working in a company before they decide to start one. And even then, they may be better suited staying as an employee.

You’ve never tried a real job
[…]
If all you’ve tried so far is freelancing, consulting, or agency work, founding is a pretty big leap. You don’t know about how companies run from the inside, about different management styles. You might have trouble forming and functioning in teams.

Why this is bad for founders: Founding requires commitment and longevity. Regardless of your C-suite title, in day-to-day operations, you’re functioning as a team lead responsible for managing a small crew of professionals. Experience in management with a corporate safety net is a boon.

Along the same lines, if you have only worked as a performer or only done short term administrative work for an arts organization, you may not have the skills and endurance to lead a small group through the rough formative years of the company.

You’ve already failed at one or more startups
We fetishize failure in the startup community, and we especially fetishize failing quickly. But regardless of the lessons you learn or the network you build, failure is still a bad thing.

In and of itself, failure is the universe telling you that your idea wasn’t good enough.
And it’s got nothing to do with execution. It’s your idea. Twitter was really poorly executed at first. It succeeded. Ditto for Facebook and lots of other consumer software. Ditto for a lot of programming languages. You can have wiggle room in execution for a truly great idea.

Why this is bad for founders: A string of bad ideas is more than just “throwing [stuff] at a wall and seeing what sticks.” It might be a sign that you’re jumping in too deep, too quickly. Fail at a few side projects, if you must. But be cautious about rushing into a new venture with nothing but failure under your belt.

The bit about fetishizing failure and failing quickly and often caught my eye (so my emphasis) because non-profit arts organizations are often criticized for their conservative approach and unwillingness to take chances and flirt with failure. To some extent, it may be to your credit to have embarked on a new endeavor and failed.

Still it is easy to fail as a result of ill-informed and conceived choices. The article makes good points about making sure you have learned from your mistakes before proceeding.

You can’t design or code (Translate as “You Can’t Directly Contribute To The Product”)

Lean startup culture says you need three archetypes for a startup: a developer, a designer, and a hustler. Traditionally, the hustler does biz dev, sales, hiring, and management tasks.

But what does a hustler do at a founding-stage startup, really? It often turns into long hours for long hours’ sake, lots of meetings with few outcomes, and boatloads of cheerleading and enthusiasm for a business that’s generating no income and has few or no users.

If you can’t pinpoint your exact skill set — and if your skill set isn’t unique, valuable, and directly related to product creation — you might want to take an employee position at a later stage company.

Why this is bad for founders: Creating a minimum viable product is often Task Number One at a lean startup. Your salary shortens the runway for such a nascent company, and you can’t sell, aka “hustle,” against a product that doesn’t exist yet.

While it might have been good to trim this one down, the bit about the hustler putting in long hours for long hours sake and doing a lot of cheerleading struck a chord.

True, the crucial function in an arts organization ends up being fundraising. But I am pretty sure the time is coming soon if it hasn’t arrive yet, given the expectations created by Kickstarter and its ilk, where it will be difficult to raise any sort of funding without some sort of interesting product example.

I suspect people won’t be as willing to give based only on the idea of a promising group creating good art. Unless you are in a position to pitch in and produce from the get go, your presence may be a hindrance rather than a help.

Paul Allen and Bill Gates didn’t bring Steve Ballmer on to run the business side of Microsoft until five years after the company had been founded and provided its first piece of software.

The arts are already full of people working unnecessarily long hours, don’t add yourself to their number.

Which leads to the next point:

Your big idea is unoriginal

[…]
If the market is saturated with variations on your idea, back slowly away from your drawing board and wait for your next big idea.

Why this is bad for founders: With too many competitors come too many problems. You might not be able to wedge your way into a crowded marketplace. Or you might get suddenly squashed by a drawn-out patent or other IP lawsuit.

Along the same theory that people probably won’t give to groups without a demonstrable product, new funding for old ideas and methods of producing art is probably not long for this world either.

Again, along those lines…

You don’t know what you want

Why do you want to be a founder? This is brutally difficult territory and requires immense passion and Herculean dedication.

Scratch that: It requires Odyssean dedication. You’re on a quest with no end in sight. Every task seems impossible. There are new difficulties around every corner.

So why the heck would you want to do that?

If you don’t have a clear vision, if you’re only running on the heady fumes of startup mania, you will most certainly fail.

Why this is bad for founders: Enthusiasm only goes so far. Only a heart and mind obsessed with a specific mission will be able to sustain you through the hard times that await you.

Again, founding an organization out of simple rejection of the current choices isn’t enough. Your vision can’t be predicated on, “We will different from them and do it better.”

What does that look like in practical terms? It isn’t enough to say you will be nimble and more responsive to change, you have to have an idea of what practices and infrastructure you need to have in place to make it happen.

The other signs Jolie O’Dell lists that I haven’t expounded upon are pretty apparent or closely related to the points I have already made: “You’re young and/or inexperienced”; “You have no network”; “You get bored really quickly”; “You have no net worth”; “You’re the primary breadwinner of a multiperson household.”

I am not saying people shouldn’t found new organizations. It seems pretty clear we need new ideas and new methods. These are just some important things to consider before you undertake such an endeavor.

Embracing The Feedback Loop

August 13, 2013 by Joe Patti

A few months back, Seattle based artist Clayton Weller, wrote a piece addressing what he feels is a self-limiting outlook held by many artists that theatre is dying and there is no money out there. He confesses to having embraced the same outlook until he worked for a start up company.

Now he advocates for every artist to work for a start up in order to adopt their more nimble outlook. (my emphasis)

When you say the word “business” to someone, especially an artist, they automatically assume you’re talking about something stuffy, rigid, uncompromising, and [insert horrible adjective].

You say “business” but they hear “bureaucracy.” THEY ARE NOT THE SAME THING!…

To eschew something because it can be done poorly, is a disservice to yourself, and might rival einsteins famous definition of insanity (look it up plebes!).

[…]

Talking directly to people, iterating ideas before execution, creating a feedback loop with measurable data; it all makes perfect sense.

By doing this you create a real connection with your customer (audience) and develop a product (art) people will not only tolerate, but will clamor for. In terms that an artist would use: your art becomes relevant.

That’s a big deal.

The average artist does NONE of these things. Not only that, they intentionally avoid them. They lock themselves away to pursue their secret “vision.” When they receive negative criticism, they blame their audience (customer). WHAT?!?

For me this addresses some age old debates about artists being more business minded and selling out vs. thinking you know what audiences/customers should like. (the most negative extremes of the spectrum)

Obviously, I like his point about not dismissing options because other people don’t do it well.

I think the complicating factor is the fear is that you too won’t do it well and the process will dominate your time and take you away from your creative work. Or worse, make you resent your creative work for making it necessary to become involved in the business side. For some it may not be a wholly irrational fear.

Still, I think regardless of your fears and regardless of your views about what constitutes selling out and remaining true to your art, the feedback loop Weller mentions is a useful process.

Failure and missteps are things you will face, especially when you are working in the arts. Proper feedback can help minimize this over time. If nothing else, the process can help you identify the proper people to solicit for feedback.

If you start a flow chart from the simple proposition that you want to support yourself with your art. You can ask, do people say nice things about my art? If the answer is yes but they don’t pay for it, you either need to find other people to get feedback from or figure out a different way to monetize your art from the people giving you feedback.

Likewise, if there are a lot of people who criticize your work, but still won’t buy it after you make the changes to the areas in which they say you fell short, then you may need to find other people to solicit feedback from.

Obviously it isn’t as completely clear cut as that. The problem may lie in your execution not being very good. My point is that you can’t depend entirely on your family and friends or trolls for feedback. It is necessary to identify people with the level of discernment you seek whose feedback you can trust and work from there.

You just need to recognize and own the potential implications of appealing to 1,000 versus 100,000. You can make a lot of money from those 1,000, but you need to be producing to a certain standard. Meeting the expectations of 1,000 can be just as burdensome as that of 100,000.

Info You Can Use: Flex Subscriptions And Your Subscriber Base

August 12, 2013 by Joe Patti

I have been pondering whether we should start offering a “Choose Your Own” subscription series in future years. In my past jobs, we never programmed with an eye to filling slots in a series so we offered “Choose Your Own” discounts without any problem. Now I am working in a place which has historically had a number of series and I am looking to offer an additional flexible one.

Since this blog is about discussing practical aspects of arts administration, I thought I would share some of the issues I have been taking into consideration both to solicit some feedback, but also give a sense of the thought process you need to engage in when making these decisions.

The numbers I am using in my example aren’t the actual ticket amounts and they are equal for all events in a series for sake of simplicity. The discount for buying the full season relative to the sub-season pricing is the same though.

Currently we offer a full season of nine shows ($290) and three sub-seasons of three shows each: Broadway ($150); Variety ($105) and Classical ($75).

My idea for a flex subscription is to offer the sub-season pricing if to any three shows or more shows of your choice.

That might break out as follows:

Instead of buying a series, people would pick and choose from among all the series. Because they are picking and choosing willy nilly, we can’t guarantee them the same seats will be available at every performance, but they still get their seats before single tickets go on sale and at a discount.

Usually the idea behind flex subscriptions is to give people who can’t make it to all the shows in a series the ability to benefit from an advance purchase discount. It is seen as a plus if you can get someone who has historically been a single ticket buyer to commit to attending multiple shows in advance.

But the important issue is the need to factor in the likely behavior of your audience. If there are a lot of single ticket purchases for three or four shows across multiple series in the days right after single tickets go on sale for full price, you need to ask if you think more people will pick up this practice or if you will only end up giving a significant discount to the same group who typically buys tickets at full price months in advance of the show. You could end up losing money in the process.

The same for those who buy the classic series and then one or two tickets to the Broadway series at full price of $65. If there are lot of those, you may end up giving up quite a lot at a $15 difference per ticket.

In our case, our biggest series base is in Broadway with far fewer in Variety and Classic. It wouldn’t represent a significant loss if the Variety and Classic people who buy Broadway tickets at full price received a discount.

My biggest concern is that we may lose full season subscribers to a piecemeal flex series. Every year there is a Broadway show people aren’t crazy about so if Full season subscribers didn’t like one show and picked the other 8 individually, that would represent a $10 loss per subscriber. Not a big deal individually, but if many people made that choice it could be problematic.

The same with the Broadway series subscribers. If they dropped one Broadway show and picked up one Variety or Classic show as their third, that is a loss of $15-$25 per subscriber.

Now the easiest solution to keeping Full Season subscribers from becoming “slightly less than Full Season” subscribers is to place the “Choose Your Own” on the same footing as the other sub-series and limit it to any three events. That way you don’t have to worry about people defecting to a 7 or 8 event subscription.

But if you are in a situation like I was in my last job where you don’t have a large subscriber base, you can go all out and offer discounts on as many shows above the minimum as people care to buy. You have a fair chance of picking up new subscribers.

I will confess I was pretty gung ho about flex subscriptions and the philosophy of giving people the most freedom to choose in return for making that choice in advance. Organizations that kept their audiences tied into a designated series were adhering to a dated concept of audience relations! But as I say, that was when I didn’t have a fairly reliable subscriber base.

Now that I am in a situation where I am doing an analysis of the pros and cons in preparation for pitching the idea to an organization with an established subscriber base, I find myself being a little more pragmatic. (Though note I am still trying to introduce a flexible scheme.)

So what about you? Thoughts about this? Are there packages you have put together to entice people to subscribe that worked? Some that back fired on you and made you lose income or subscribers?

Value Is Not Price

July 31, 2013 by Joe Patti

The Drucker Exchange recently noted that the Cincinnati Reds and Michigan Wolverines teams have started using dynamic pricing, scaling prices based on popularity.

The Reds don’t provide much information about their structure, though they promise the price will never fall below whatever the season ticket holder pays. They set their base pricing at the start of the season per anticipated demand and start implementing the dynamic pricing two weeks out so it probably pays to buy early.

The Wolverines basically set their anticipated pricing from the start ranging from $65 for the Akron game, $10 less than last year, to $195 for the Notre Dame game, $100 more than last year. (And by the way, that is the lowest price tickets. Their top tier tickets for Notre Dame are $500.)

The piece on The Drucker Exchange says the mistake companies often make is to ask what customers value. This is aptly illustrated by the secondary market for those Wolverines games. You can get those $65 Akron tickets for $35 on the secondary market, but those $195 Notre Dame tickets seem to be going for about $319 already. (Single tickets go on sale tomorrow, 8/1)

Peter Drucker lamented how few companies recognize the importance of simply asking themselves what their customers value. “It may be the most important question,” Drucker noted in Management: Tasks, Responsibilities, Practices. “Yet is the one least often asked.”

One reason for this is that companies think they already know. “Value is what they, in their business, define as quality,” Drucker wrote. “But this is almost always the wrong definition.” For example, for a teenage girl, “value in a shoe is high fashion,” while durability and price matter little.

“Another reason why the question ‘What is value to the customer?’ is rarely asked is that the economists think they know the answer: Value is price,” Drucker added. “This is misleading, if not actually the wrong answer.”

For instance, electrical contractors, while famously price-conscious, may prefer one of the most expensive fuse boxes on the market. “To the contractor this line is actually low-priced because it is engineered to be installed fast and by relatively unskilled labor,” he explained.

The ultimate lesson is simple but not easy: “The customer never buys a product,” Drucker wrote. “The customer buys value.”

(My emphasis on that last sentence on the Drucker citation)

There are many intangibles that factor into what people value. Will the Notre Dame game be three times better than Akron? Possibly. By game day in September, there is a fair chance the primary market tickets to the Notre Dame game will be four or five times more expensive than Akron, if not more.

There will be a point where the quality of the actual Notre Dame gameplay can’t be better than that of Akron in proportion to the difference in ticket price.

What people are willing to pay so much more for is the experience of tailgating and attending a potentially great game steeping in the palpable excitement surrounding the long rivalry between the two teams with thousands of others.

I have resistance to dynamic pricing for a number of reasons, many of which have to do with the relationship I feel we are trying to cultivate with our audiences.

The question is, do people really recognize and value that we are making the effort? Is it all pretty much one-sided? Many people don’t really discern between profit and non-profits organizations when making their entertainment decisions.

Are non-profits basically putting themselves at a disadvantage by not using dynamic pricing for shows that clearly will sell out months before the performance date based on a devotion to an audience that has no idea the organization has decided to suffer for their benefit?

There is a need to keep prices low to provide affordable access. If 900 people clearly value attending a performance that they will commit at $25 a ticket between one and three months before the show, do you really owe it to the last 100 people to maintain the $25 rate until they get around to buying tickets?

Or do you owe it to your long suffering staff to try to increase the revenue stream so you can pay them $12/hour instead of $8 by using dynamic pricing?

We aren’t sure about the investment of the community in your organization, but we can be more certain about the investment of your staff.

I am still a little uncertain about dynamic pricing. The issues aren’t as clear as I present them here. However, one issue I don’t generally see people mention in the dynamic pricing conversation is that by not using it you are potentially punishing your staff in the service of an ideal the community may not be aware of much less value.

If customers show they willing to place a higher value on a product, should non-profits acknowledge that by placing a commensurately higher price on it?

Stuff To Ponder: Subscriber Rush Tickets

July 22, 2013 by Joe Patti

Since I have started a new job I am in the process of evaluating every document, process and interaction my organization undertakes. One of those areas is customer service, of course.

For that reason, an article I came across via The Drucker Exchange is really resonating with me. In a blog post titled, The Dark Side of Customer Experience, Monique Reece opens with a joke we can probably all relate to.

The longer version is in the post, but basically a guy dies and is shown heaven and hell and given a choice between the two. On his visit to heaven, everything is sedate and lovely. Hell is a veritable Mardi Gras party. After the doors close on Hell, the guy tells St. Peter he chooses Hell. The doors open and it the scene is the stereotypical hellish landscape.

Upon wondering what happened to the party scene, the man receives the response “Well,” said St. Peter as the doors closed. “The first time you came to visit you were a prospect. Now you’re a customer.”

Reece cites some of my biggest pet peeves– the introductory rate that rewards new customers and makes the person who has been loyal for 10 years, enduring price increases, feel like an idiot for sticking around so long for no recognition or reward. As Reece notes, there is actually more of an incentive to separate your relationship and then renew it.

The performing arts version of this is giving cut rate discount tickets to last minute purchasers, suggesting a certain amount of foolishness on the part of those who planned and purchased ahead of time. Some arts organizations sell large amounts of rush tickets at rates lower than those of subscribers who have committed to many shows in advance.

It just occurred to me moments ago, why don’t performing arts organization offer Rush tickets exclusively to those who have already purchased two or more tickets?

This would have multiple benefits 1- It rewards people who committed in advance; 2- It turns those people into recruiters for your show when they invite their friends along; 3- It gets people you already have a relationship with paying closer attention to your emails or social media account that you are using to communicate this discount, providing an opportunity to get them excited and mention other shows.

My suspicion is that attending a show on a half price ticket thanks to two people who purchased weeks in advance is a better model of behavior than attending alongside two other people who also decided to attend because tickets were half price.

It probably also reinforces many elements of the advance purchasers’ self-image if they know their friends were only able to attend because they were stalwart supporters of the arts organization.

The only real problem I can see with this idea is reserved seating. Offering rush tickets in this way appeals heavily to a social element which is compromised if everyone can’t sit together.

Granted, it illustrates the appropriate outcome associated with paying half price on the day of a performance versus full price in advance. Still the emotional disappointment of not being able to sit next to ones guests could supplant the acknowledgement of this logical consequence.

General admission events are good to go though.

This is not the direction I intended to go in when I started this entry. I like this result better.

We’ll Pay You Twice As Much As The Last CEO (snicker)

July 17, 2013 by Joe Patti

Apropos to my post dealing with doing more with less earlier this week, last week Janet Brown, CEO & President of Grantmakers in the Arts wrote about the problems with non-profit CEOs forgoing pay.

She cites an example where the retiring CEO of a performing arts center had only accepted a nominal salary. The savings that represented meant the different between running a deficit. Now with the CEO retiring, they either needed to find someone else who was willing to do the job for free or find the money to pay someone for the job.

The performing arts center should have been booking the CEO’s non-salary as an in-kind contribution all these years, keeping the reality of the expense in the budget. This, of course, would have shown a loss for some years, which (I’m only guessing here) is probably not what the CEO or the Board wanted. So the cycle of under-capitalization continues.

Brown asserts that every organization should strive to be completely transparent financially, not only for the sake of those who inherit leadership positions, but also to retain the confidence of supporters.

Sound business practices are possible in nonprofits but, as I’ve stated before, this demands transparency and leadership that wants to do more than keep the doors open….Our investors in the nonprofit arts world are community members, governments, foundations and corporations who give money because they believe in our organizations, their missions and the good they are doing for our communities. These investors also deserve (and should demand) returns, which include the best artistic product possible and the strongest balance sheet good management can provide.

I guess the lesson here is not to pay your executive director as well as your interns, erm I mean, pay them both!

Giving, Rather Than Sacrificing

July 15, 2013 by Joe Patti

I was thinking last week about the growing sentiment that non-profit organizations should resist the impulse to do “more with less.” The idea being that it gives funders, boards, government entities and the public an unrealistic view of what the real costs of programs actually are and is likely to cause burnout among employees.

The quality of all programs will probably suffer in an effort to make up for the loss of funding to one, as well.

Although it would really hurt organizational pride and morale, the suggestion is to eliminate the program rather than stretching and stressing yourself even more trying to maintain it. That way, at least the consequences of low funding are unambiguous.

A cynical thought crept into my mind that some organization of younger workers unfettered by concerns of good pay and work-life balance might come along and belie your insistence that the program couldn’t be supported, by happily suffering through its execution.

But soon I got to thinking, why not let them? Not that you should welcome an under-captialized organization with unrealistic expectations, but if there was someone qualified who thought they could do a better job, maybe your organization should hand over your files to them.

I started to wonder if many non-profits had really ever thought of this. Most organizations are aware of people doing similar work in their region, whether they are viewed as competitors or providing parallel services. If you are being faced with having to eliminate a program, but are conflicted and a little guilty thinking about all those whom you serve losing something they valued, perhaps it is best to give your program materials to a group that possesses better resources or sees that program as one of their core competencies.

Once you no longer view each other as competitors, there may be room for constructive partnerships. For example, a performance venue who is seeing their K12 school show program flounder due to decreasing availability of bus money might direct their clients to a group that performs in schools, but doesn’t have their own facility.

The traveling group may benefit from the additional contact list, as well as costumes and props that the venue will no longer be using. In return, however, the traveling group may still do an occasional school show for the venue or may produce a series of weekend family matinees at the venue, allowing the venue to continue offering family programming without having to bankroll the development.

Or perhaps both groups wanted to do an after school program, but neither had all the resources they needed to pull it off. Yet as partners, they do.

By the end of my musing, I started to think that trying to do more with less and hold on all your programs might not only be harmful to your organization, it might also impede constructive partnerships.

Instead of looking around at other groups as competitors for the same pie, which granted is increasingly becoming the case, it may be more productive to evaluate what other people are doing as well, if not better than you, with an eye to possibly having to cede that to them.

Times when things are going well are probably best to consider these issues because it also allows the time to evaluate potential partnership options while free of financial panic.

Perhaps you will decide to transition things away before a critical decision ever needs to be made, when your program still remains vibrant and is a worthwhile addition to another company.

No organization should be in a mode of constantly contemplating its demise. I know many elderly start mentally ear marking who will get what when they die, if they haven’t already started actively giving things away. I don’t think that is a healthy way for a non-profit to operate.

It should know where its strengths lay, what its core functions are and what things occupy a more secondary role. Strive for excellence in everything and shine in the community, but be consistently clear about what the priorities of the organization are.

Boards and staff members are likely to have strong emotional attachments to the work that your organization is doing, and probably rightfully so. An open and ongoing conversation about what another organization is doing well can help to motivate your organization to step their game up and do a little better.

But having an open conversation about the organizational priorities as well as what other organizations are doing well may ease the decision to cede/transition a program away if the staff and board has regularly acknowledged the worthiness of another organization to do the work that is being set aside.

Info You Can Use: Let’s Play Find The Exploitative Clause

June 3, 2013 by Joe Patti

About a month ago, I wrote about webcomic Penny Arcade’s online reality competition Strip Search which is aimed at finding the next great webcomic artist. (By the way, both the comic and the show are often NSFW)

I had mentioned that it seemed like the aim of the show was to use the Penny Arcade fame to help advance the careers of these artists.

I think their most recent episode of Strip Search provides a model for teaching arts students of all stripes about contracts.

Penny Arcade has famously signed away the rights to their intellectual property at least twice and only regained it by dumb luck. This is a topic near and dear to their hearts. I have seen the creators, Mike Krahulik and Jerry Holkins, and their business manager, Robert Khoo, talk about it in interviews and convention panels a number of times.

Khoo is probably the only business manager in the gaming world to achieve hero status for saving Krahulik and Holkins from themselves and helping to grow their company.

In this episode they have the contestants read through an exploitative contract and then go in and talk to Khoo about what they want struck or changed. Khoo basically plays a bumbling idiot in the negotiations because the whole point was to get the artists to evaluate the contract rather than necessarily deal with a combative negotiation environment.

Also, because it was a contest they only had a set amount of time to evaluate the contract and conduct negotiations. In real life situations everybody acknowledges the importance of investing all due care reading contracts and consulting with an attorney.

After the contestants spoke with him, Khoo mentioned that there were two basic approaches to the contract they could have taken. Either decided what their core values were and question whether the contract achieved or impeded those values or go through line by line analyzing each condition (or obviously a hybrid of both).

Because a classroom setting is similar to the contest environment with only a limited time to evaluate a contract (even if a student gets to take it home over the weekend), having a similar opportunity to look at a contract with many elements not in the artist or organization’s best interest and then roleplay a negotiation could certainly be helpful to arts students.

One of the things I never thought I got enough of in grad school was contracts. We got to look at a few contracts to see the sort of things that went into them and I got to read all the Actors Equity handbooks I wanted.

There really wasn’t a discussion about the type of things you would want to change because it wasn’t in your best interest.

Many people may be under the impression that a contract is something that you need to comply with as best you can if you want to do business with them at all. I think there is a basic assumption that the other party is acting in completely good faith and little acknowledgment of the possibility that the other guy may be trying to fleece you to the fullest extent possible.

Most people acting good faith with a reasonable bias toward themselves, but you had still better read the contract every single time it gets set before you.

Business Plans Enhanced By Creative Mediuum

May 28, 2013 by Joe Patti

I was really happy to see that MIT required the projects submitted to their annual $100K Entrepreneurship Competition to have the arts at the core.

The impetus for making this a requirement:

“came to Magee when he was sitting in on business pitches and noticed that many of them could have used an artist’s touch. “This isn’t just about businesses that need a graphic designer or have a beautiful website,” he says. “It’s about businesses with arts at their core.”

The committee for the competition received 40 submissions, but only half met the requirement of having arts at their core.

This reminded me about a post I did on the competition that University of Toronto’s Rotman School of Management held last year where the teams including design students offered a more compelling and engaging pitch than the MBA students.

It reinforces the value those with creative degrees bring to business and points to the necessity to train creatives how to bring that value to businesses.

The winner of the MIT contest was a site called Mediuum and described as “a sort of iTunes for art, providing access to digitized art works for the masses.”

According to the team’s project page,

The art market is a $40 billion annual market, but is riddled with problems that alienate its largest potential consumer base. Digital consumers are habituated to the instant access and gratification they enjoy with other cultural content, like music and movies. By comparison, finding art they like is expensive and time consuming, and there is no digital solution.

Enter Mediuum:

Mediuum lets people discover, display and enjoy the art they love most, on digital screens. We combine an online marketplace of exceptionally high quality work by the world’s most talented artists with a platform that allows people to display that art on any screen. Our solution is creating a new online market for art discovery and consumption.

I visited the site and was a little disappointed. The only way to get on is the request an invitation. My first thought was that this was a reflection of the elitism that everyone accused the arts of perpetuating and an aspect of the alienation the project page referenced. The only way to access the art is to meet the approval of a gatekeeper.

I submitted a request for invitation and received a message that they would get back to me. Over 24 hours later, I still haven’t received a reply.

Now that being said, there have been many new online services that have required you to receive an invitation during the early stages. This has been the case with many Google products, including Gmail. In time, Mediuum may be easily available to all.

Or it could just be taking the problems of bricks and mortar establishments to the Internet.

Before There Was Rocco..

April 29, 2013 by Joe Patti

…there was Anthony Radich.

Looking back at some of my old entries, I was surprised to find I had forgotten that five years before Rocco Landesman uttered his infamous blasphemy/straight talk about there being too much art, Western Arts Federation Executive Director, Anthony Radich had suggested killing off arts organizations.

So let’s euthanize some arts organizations. Let’s pull some of the nonprofit arts programming off the arts-production line and free up funding and talent for reallocation to stronger efforts–especially to new efforts tilted toward engaging the public. Let’s return to the concept of offering seed money for organizations that, over a period of years, need to attract enough of an audience and develop enough of a stable financial base to survive and not structure them to live eternally on the dole. Let’s find a way to extinguish those very large groups that are out of audience-building momentum and running on inertia. Instead of locking arts funders into a cycle of limited choices, let’s free up some venture capital for new arts efforts that share the arts in new ways with the public.

I guess everybody takes note of the director of the National Endowment for the Arts, but forgets about what the head of an equally important regional arts service organization says.

As with Rocco, the issue is much more nuanced than at first glance. I wrote about it and there was some good discussion on Andrew Taylor’s blog at the time.

Info You Can Use: Kickstarting Your Taxes

April 10, 2013 by Joe Patti

Salon has an important article to read if you are an artist trying to use Kickstarter to fund a project. Apparently people don’t realize the money they receive via Kickstarter is considered taxable income by the IRS.

In short, money raised from Kickstarter and other crowdfunding platforms is considered to be taxable income. Amazon Payments, which handles the credit card transactions for Kickstarter, disburses the funds to the project creator and sends them a 1099-K, a tax form that reports “Merchant Card and Third Party Network Payments” to the IRS. In this particular case, a pledge made by a fan to a project would be considered a third-party network payment.

[..]

“Although musicians may not necessarily be selling something via Kickstarter, they are still entering into a transaction with their backers,” he noted. “If they reach their goal of ‘X’ amount of dollars, they have certain conditions they’ve agreed to make. They should consider the money as income because the IRS defines gross income from ‘whatever source derived,’ unless specially excluded.”

The article also notes that artists often underestimate the cost and logistics of making good on their promises. One woman promised her supporters tickets to a show so when she exceeded her allocation of comp tickets, she had to buy the rest herself. Another ended up spending $10,000 in postage mailing out the items she promised.

Kickstarter also brings an issue artists have faced with their patrons since time immemorial–their desire to be involved in all the decisions.

The issue for Dawn was intensified by her raising five times the amount of her set goal. Suddenly, fans were complaining that she didn’t really need the whole $104,000 to record the album. Dawn countered by noting that not only did she use all of her Kickstarter funds, but she also opened four separate credit cards and dipped into her life savings to cover the difference.

One of those interviewed for the article suggested that anyone thinking of launching a campaign consult with an accountant or business manager first to plan for the tax liabilities and expenses the campaign will entail.

Is It Against The Law To Pay Me More?

March 26, 2013 by Joe Patti

You may have heard about Dan Palotta’s recent TED Talk about how judging charities on concepts like administrative overhead ratios is hobbling their ability to solve huge problems.

He makes some persuasive points, though some of the concerns I had with his proposals when they appeared on the Harvard Business Review blog three years ago still remain.

Gene Takagi picked up on the talk and addressed legal considerations which would prevent non-profits from operating in the manner Palotta suggests. (Just to be clear, Palotta never suggests charities cleave to non-profit status.)

Takagi notes that charity pay scales are limited by laws governing 501 c 3s and so can’t compete well on salary if supporters show tolerance for doing so to attract the best talent. Expenditures are limited in much the same manner,

“If a for-profit spends 90 cents to make $1, it may be a perfectly acceptable profit margin, but if a charity spends 90 cents to make $1, it would be widely viewed as a terrible waste. As a result, many charities fail to properly report their fundraising expenses, and the IRS has raised the possibility of utilizing the controversial commensurate test, which addresses whether a charity is using its resource in line with its charitable mission…But this can’t be judged strictly on percentages, and charities should be allowed to experiment so if an honest fundraising and mission awareness-raising campaign fails, the charity isn’t slaughtered for it. The problem, however, is not the law, but the misguided public ideology of which Dan spoke.”

Charities are also often limited and discouraged from pursuing new revenue ideas by federal and state laws as well as popular sentiment.

I think the biggest question that this whole discussion raises for me is whether social attitudes are such that a for-profit company raising money for social issues will be tolerated. Given that people will give money to projects via things like Kickstarter without much consideration about whether it is non-profit or not, is the idea that non-profits do things that companies won’t due to lack of profitability and governments can’t/won’t due to lack of political will and expertise, over?

Currently I think there is a capricious element to Kickstarter campaigns that make it an unsuitable model for garnering long term support. However the very existence of such mechanisms may be shifting mindsets to a place where worthiness and overhead ratios are not mutually exclusive.

What About Artists On Corporate Boards?

March 25, 2013 by Joe Patti

A posting by Alex Tabarrok today on Marginal Revolution inspired some “what’s good for the goose…” thinking for me today. He links to a study showing that academics on corporate boards tend to keep the company healthy.

I am not going to suggest putting arts and culture people on corporate boards will automatically help a corporation any more than encouraging them to settle in a city will make the area more economically prosperous. However, many of the impacts the study finds academics (both professors and administrators) have on companies appear to be ones that arts professionals might bring as well.

First, academic directors are outside directors with relatively strong reputations and a tradition of independent thinking. They are trained to be critical thinkers with their own opinions and judgments, and they are less influenced by others and can be tough when necessary (Jiang and Murphy, 2007)…Fama (1980) and Fama and Jensen (1983) argue that outside directors have incentives to monitor management because they want to protect their reputation as effective, independent decision makers. Thus, the monitoring theory indicates that academic directors would be important monitors of management.

Obviously, not all professors would make good directors, nor would all arts people. However, arts people have that tradition of independent thinking and an almost inborn fear of being labeled a sell-out which can motivate them to speak their concerns.

Third, academic directors’ primary areas of expertise are academic in nature. They tend to think through problems differently than nonacademics and can provide different perspectives in the boardroom, which adds to the board’s diversity. Prior studies find that board diversity (such as occupational diversity, social diversity, gender diversity, and ethnic diversity) is an important factor that influences board efficacy and firm performance

If arts people don’t bring a different perspective to things, I don’t know who will.

The area the study found that academics contributed most to a company was in relation to oversight. As I read the following, it seemed that non-profit board meetings and the attendant committee meetings, something that is at the center of both a professor and an arts administrator’s life, might actually be an asset.

“We find that academic directors are more likely to attend board meetings than other outside directors. In addition, academic directors hold more outstanding committee memberships than other outside directors. Specifically, academic directors are more likely to sit on monitoring-related committees, such as auditing committees and corporate governance committees, than nonacademic outside directors. The results on the director attendance behavior and committee assignments indicate that academic directors are better at board governance than other outside directors.”

Other benefits to oversight the study found was that CEO turnover was more closely tied with company performance and the financial operations were run in such a way there were fewer Securities and Exchange Commission investigations of the top executives when academics sat on the board. Companies with academics on the board also tended to be more innovative.

Now, of course, the disclaimers. Not all types of companies had academics on the boards and the study finds that different types of companies benefited from different board compositions.

Business professors were the most effective board members. Other types of academic fields mentioned were technology and law. This is not to say that arts people wouldn’t be effective because it doesn’t appear that too many liberal arts professors were asked to serve. It is something of an unknown quality.

If corporations are valuing creativity and critical thinking from employees, especially recent college graduates, they could presumably benefit from tapping those who teach them.

Likewise, they could benefit from arts people who are not only creative, critical thinkers, but are constantly cobbling together coalitions to pursue projects.

But the potentially biggest impediment to effective service on a for-profit board for both academics and arts people is whether they are dependent on the corporation upon whose board they serve for support.

“Furthermore, some academic directors hold administrative positions and thus may have connections to companies through university endowments or other fundraising relationships, which may make them less independent than inside managers.”

Still, it is interesting to think about the potential benefits to a corporation to have an arts person serve on the board.

In wondering why it doesn’t happen more often, I came to the not inconsiderable or illogical conclusion that corporations may not view those who ask them for money as equal to the task of helping them make money.

Trying New Things With No Apparent Benefit

March 18, 2013 by Joe Patti

Something a former employer has started doing has reminded me to always keep your options and mind open even if the potential value is unclear.

I used to coordinate the operations for the Appel Farm Arts and Music Festival. A few years ago, one of the board members, (now executive director), had the idea to offer a 25 mile bike ride on the festival day. I believe this year will be the third year they are doing it.

Because the festival is outdoors in a rural area, having a bike ride does fit the vibe of the event and the lifestyle of many of those who attend. But I gotta tell you, it would have never occurred to me that people would be up for a 25 mile ride followed by a full day attending an arts and music festival.

Just thinking about it is exhausting to me. Also, most of the audience does not live in the immediate area. Will people really want to haul their bikes to south Jersey to do this ride and attend the festival?

Just based on my experience living where I do now, I know there are enough bike enthusiasts who won’t hesitate to answer yes to all of the above. 10 years ago, I would have discounted the idea. And in fact, maybe all the elements weren’t in place to make it an attractive option back then.

As the guy responsible for all the logistics for the event, there are details related to adding the ride that would have concerned me and made me resist it. But there was a good volunteer corps that supported the festival so none of the details would have been too troubling in the end.

I applaud them for making the initial investment of time and energy to try it out. It is easy to advocate for experimenting and trying new things, but there are always practical considerations. The festival is a big event and to add something new diverts attention away from the core activity.

It may sound simple to gather a bunch of people on bikes, send them on a ride and make sure to have water and snacks available at the planned rest stops. There is still a lot of planning and tracking involved with the ride and I imagine the festival staff and volunteers make it look a lot easier than it is.

I think that it can sometimes be easier to diverge from the core mission of the organization in order to chase funding and grant money, but more difficult to add activities which complement existing programs but do not have a clear potential for financial gain.

I am not saying this was the case with the bike ride. They may have seen the opportunity to add 50 new attendees for all I know. I am just observing what is a potential paradox of just about any business. It is easy to get sidetracked by the prospect of new opportunities to the detriment of enhancing the value of existing conditions.

People may think that doing something with no apparent benefit is the cornerstone of a non-profit organization’s existence, but living and working under that philosophy doesn’t make the decisions any easier–especially when you are frequently enjoined to act more like a business.