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Toward Better Organizational Self-Evaluation

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I have been thinking a bit more on my post about when you get your first hint that things aren’t going well for your organization. I haven’t thought up any more interesting warning signs, but I have been thinking about the “after action” conversations between staff members I mentioned.

It isn’t necessarily a sign that things are going downhill, but I do think at least a semi-formal post mortem discussion that leads to action is necessary for the health of the organization. If people gather around the water cooler, talk about how great the show was, sigh “if only more people were in the audience” and then go back to their desks leaving it to the marketing department to fix or hoping things are better next time around, that isn’t really constructive.

I have worked for companies where a post mortem discussion focused on the technical issues that needed to be fixed/learned from the next time around, but I have come to realize that development, marketing and audience services need to be given equal time. And they need to be at the same meeting with the technicians.

I will be the first to admit I don’t do this to the extent I am envisioning it should be done as I write this.

There may be smaller meetings prior to the post mortem where each department collects their thoughts so they can summarize their victories and challenges and keep the meeting short. But if you are going to embrace the idea that responsibility for marketing and development are shared across the organization, then every department probably needs to be largely present.

It is too easy otherwise for those who are not present to feel disconnected and uninvested in the central goals of the organization, inhibiting long term progress.

It can be easy to address concrete technical problems like broken equipment and missed cues. It is more difficult to figure out intangible things like how to attract audiences and motivate volunteers. When the decision is made to have a cabaret in the lobby prior shows in order to engage audiences as they arrive, it is better that the tech people were in on that entire discussion and know the motivation rather than being told they now needs to support a cabaret before every show.

Probably annually there should be a discussion about whether what the organization is doing is working. The ultimate decision will be up to the board, but the staff are all experts in their respective fields. They may be best positioned to say whether what the organization is doing is working. If the season is programmed out of a sense of obligation (seven shows, Shakespeare in the Fall, Musical in the Spring) rather than as an acknowledgement of the current operating environment and community, then the impetus for change and the supporting evidence may need to come from the organization’s staff.

Admittedly, it is difficult to move against the inertia of an organization’s history and business model for both staff and board. I don’t know that a staff would initiate a radical change. On the other hand, if they were regularly involved with providing feedback and saw it was often acted up, who know what people might feel empowered to suggest.

The impetus for this post came not only from thinking about the warning signs post from last month, but also thinking about a post I did from a year about about founding arts organizations with planned expiration dates. Though I thought expiration dates are a great idea, I wondered if anyone would have the fortitude to do it.

From there my thoughts turned to the concept that any business should always strive to do things a little better the next time around. I figure there is a better chance of arts organizations putting a self-evaluation process in place than planning for their own demise. Given that, I started thinking about what practices need to be in place to allow an arts organization to be responsive to changing times?

What I would really be interested in is knowing if anyone works for any sort of organization or business that has institutionalized a really effective self-reflective process like this. What about the corporate/organizational culture has made it so effective?

People will avoid the mechanical imposition of this sort of structure so there needs to be some whole hearted investment by the employees. I would bet that any organization that does a good job examining themselves also has a highly effective personnel review process.

Can You Pursue The Intrinsic Value of Arts Alone?

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There was a post by KCET columnist Corbett Barklie last fall that has had me thinking and wondering if there hasn’t been enough conversation about this topic.

In short, Barklie feels that arts organizations are sacrificing a focus on the intrinsic value of art in the pursuit of “social service” related activities. (my emphasis)

Arts groups exist to interpret the past, elucidate the present, and imagine the future. To borrow from Dewitt H. Parker’s The Principles of Aesthetics, “The intrinsic value of art must be unique, for it is the value of a unique activity — the free expression of experience in a form delightful and permanent, mediating communication.”

Nonprofit arts groups and the artists that run them are not reactionary entities. They are visionary entities.

You may be thinking, “But what about art groups who work in schools? Artists who work in hospitals?” In my opinion, those are arts service organizations — a rarely made but critical distinction. Arts service organizations exist to create and provide ancillary programs that help fulfill the missions of social service nonprofits such as schools, community centers, hospitals, etc…

[…]

Because no distinction has been made between arts groups and arts service organizations, the general arts and arts policy conversation (set by funders and designated leaders) is getting more and more muddled. And artists who exist in organizations that are only concerned with artistic excellence are beginning to feel marginalized.

[…]

Unless and until arts groups find their voice of disagreement and set aside fear of funding or political ramifications long enough to speak up for themselves, the conversation will continue to focus less and less on challenges facing arts groups that are committed solely to artistic excellence. Eventually these arts groups will fade from view completely.

My first thought was, but isn’t an educational component the way it is supposed to be? Most non-profit organizations are organized under the aegis of the education part of 501 (c) 3. In a time when there is less arts education in schools, isn’t it in our best long term interest to be providing educational services? But then again, by Barklie’s definition, I have been working for arts service organizations for the last 20 odd years so this is the normal for me.

So my question to my larger audience; is it as Barklie suggests (and most recently echoed by Diane Ragsdale), have funders and others lead the arts in this direction?

After all, at one time, art was presented for arts sake and there wasn’t any efforts to supplement the efforts of education and health care.

Is this an improvement or a dilution of our effort? It can be argued that pursuing education programs helps put arts organizations in touch with their and constituencies, helping to remove ivory tower mentality and acculturate the community.

But there is also the issue of diverting resources from the core competency and mission of the company. For profit businesses aren’t expected to do this. Many get immense tax breaks with no expectation that they serve the public good.

Is it the new normal that arts organizations must split their focus in order to maintain their existence? Is there an egotism inherent to believing you should be able to pursue the intrinsic value of art alone?

Shaping oneself as an arts service organization seems about the only option for garnering foundation funding and mollifying governmental entities who want something more than pursuit of artistic excellence as a justification for being.

Thoughts?

Religion vs Arts, Who Wins The Battle Of Orthodoxies!

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Since the very beginning of the blog, I have been keeping an eye on the intersection of performing arts and religious communities. A recent NY Times article seems to include quite a number of places where this occurs.

It starts by describing a warehouse space that has the

“trappings of a revitalization project, including an art gallery, a yoga studio and a business incubator, sharing the building with a coffee shop and a performance space.

But it is, in fact, a church. ”

If you look at the website of this art gallery-cum-yoga studio-cum-etc-cum church, it might take a couple glances to realize it is a church.

You can say a lot about the importance of adhering to propriety and doctrine that should be part of sacred institutional practices and how the approach of many organizations isn’t invested with appropriate due seriousness.

But you can say the same thing about churches, too.

Oh wait, I mean arts organizations. Wait, which one was I talking about? This is so confusing.

You may be surprised to learn that not only has church attendance been falling lately, but there is a churn rate of about 40% annually.

Sounds a lot like the plight of arts organizations, eh?

Not only that, there is a real bias toward entrepreneurship

“For new leaders coming out of seminary, “the cool thing is church planting,” Mr. Bird said. “The uncool thing is to go into the established church. Why that has taken over may speak to the entrepreneurialism and innovation that today’s generation represents.”

Sounds a lot like the sentiments of performing arts kids coming right out of school that want to start their own company.

Like arts organizations, there is a push to connect with the communities in different ways, some going so far as to remove references to “church” and “services” in favor of “gatherings” and “communities.” One group has seen some success with centering their spiritual communities in coffee shops and is preparing to franchise their coffee concept.

As strange as a chain of spiritual coffee houses sounds, the trend seems to be away from the huge mega-churches, many of which have been foreclosed on, toward smaller multipurpose spaces that can be turned toward earning revenue rather than being empty six days a week.

In some respects having a church be the center of community center is a return to old practices. Chartres Cathedral was a bustle of commercial activity both inside and out.

One of the prime questions that emerges for me as I read this article is how religious/spiritual groups, which I believe stand to suffer much more from embracing the trappings of popular culture and entertainment than arts organizations do, seem to be a bit more nimble than the arts community at experimenting with new approaches?

I realize that many trends reported on by the NY Times are often not as widespread as the paper makes it appear, but as a person who rents a facility to religious services, I can attest that the article isn’t many degrees different from my experience.

It amuses me to think that the arts community self imposed idealism about selling out and becoming too commercial might actually represent a more inflexible orthodoxy than those embraced by religious communities possessing texts containing rules of behavior.

Though it isn’t as if the arts community isn’t having this same conversation. This is what Creative Placemaking is really all about. What these churches are doing may provide some interesting models and even potential collaborators in the pursuit of placemaking.

Do Arts Really Need A Tax Status Of Their Own?

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Today is the 150th anniversary of the Emancipation Proclamation. If you saw Spielberg’s movie, Lincoln, you will know that there were many concerns about the legality of trying to make the proclamation stick, especially upon reunification of the country, which necessitated the adoption of the 13th Amendment to ensure the abolition of slavery.

The movie actually reminded me a lot of an episode of The West Wing where legislative wrangling was set against the backdrop of a president’s daily national and personal concerns. Either the job hasn’t changed a lot in 150 years or Spielberg was presenting the story in a familiar context.

Let me state clearly from the outset I don’t want to equate slavery with non-profit art organizations. The anniversary and the relationship between the proclamation and 13th amendment is just a convenient excuse to revisit a topic.

The concept that a situation only had tenuous legal support has parallels in the non-profit status most arts organizations enjoy. There is no mention of arts organizations in the 501 c 3 tax code. I made note of this in an open letter post to President Obama on the occasion of his inauguration four years ago.

In that post I asked the president to help the non-profit arts sector by providing a specific, better designed tax structure in which arts organizations can operate. Thinking back I wondered if that was still necessary given the continued emergence of the L3C model, B corporations and the crowd funding/investing options allowed by the JOBS Act.

Don’t get me wrong, none of these options are well suited to arts organizations. I just started wondering if the arts are really best served if the government legislates a specific structure within which they must operate. Experimentation with planned organizational expiration may do more to cultivate viable, community/situation specific models than asking for one to be legislated.

Having arts organizations making common cause with for-profit corporations and other interests to advance laws and regulations they mutually favor may do more to raise the profile of arts organizations in general than had the arts groups worked among themselves to carve out something specific to the arts sector.

Just something to think about at the start of a new year and a new presidential term since many ideas and opportunities have emerged since the last one.

Stuff to Ponder: Get Thee To A Start Up Weekend!

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I was intrigued to see that the Scion car company is running a contest to help cultivate new entrepreneurs. Scion has always positioned themselves as a lifestyle brand, (disclaimer: I own one of the first 100 Scions sold in my state.), but I thought this was an interesting approach for them.

Basically, they will fly up to 50 semi-finalists to LA to participate in a three day event where they attend seminars, meet up with mentors and receive advice on writing press releases, forming LLCs, getting loans, soliciting investors and copywrighting ideas (I am guessing they mean trademarking since you can’t copywright ideas.) The semi-finalists then rewrite their proposals and finalists are chosen from the best revamped proposals.

I am sure there is a lot Scion will get out of it, but free advice directly applying to their own business isn’t one of them. One of the first restrictions on the contest is that it can’t be related to the car industry or Scion’s business activities.

This idea isn’t new. There are tons of entrepreneurship competitions out there as well as start up weekends where people from all sorts of background come together to meet and potentially launch a start up in the course of 54 hours.

The Scion contest got me thinking about two things- First, could an arts oriented project end up as a finalist in one of these type of competitions? Could someone go into one of the Start Up Weekends and emerge with a viable arts oriented company and business model after tapping into the brains of those present?

My second thought was from the other direction–should arts professionals participate as advisers in these sort of events in order to exhibit the value of the arts in the community beyond just entertainment? This might go a long way toward making the case not only for arts organizations, but perhaps more importantly toward the value of arts in education, if it was shown that it can contribute to the development of products and ideas that are indeed marketable.

The success of the design school teams over the business school teams in a University of Toronto’s Rotman School of Management challenge already started to provide some indications of this.

I have written about articles on what private enterprise can learn from non-profits.

I also pointed that it is important to note that the value of many of the creative exercises arts organizations can offer business lies not so much in the superficial motions of the activity as the fact that performing them means you are carving time out of your day to devote to creativity.

What If They Don’t Want To Be An Executive Director?

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On the Harvard Business Review blog site, Anne Kreamer asks “What If You Don’t Want to Be a Manager?” (h/t Daniel Pink) where she talks a little about the alienation one might feel moving from being a producer of material to a manager. While she talks about an experience in a corporate environment, it was easy to see the same situation cropping up in the arts when someone moves from creating content to producing revenue reports and reviewing labor laws.

One of the options Kreamer suggests, other than leaving the company and striking out on your own, revolves around changing the existing work environment. It was her last two sentences that resonated with me (thus my emphasis).

This is something more companies need to address. To remain globally competitive, organizations need to devise innovative ways to encourage and reward creativity. The unorthodox titles embraced by start-ups — directors of fun, ministers of information — can seem ridiculous, but the emphasis on improvising new ways of doing business is important. Furthermore, research conducted by Office Team found that 76% of employees did not want their boss’s job. If employees are no longer responding to the old carrots, it’s time for companies to establish new means of rewarding talent.

This reminded me of the Daring to Lead and Ready to Lead reports I had written on in the past that reported young arts leaders were chomping at the bit to gain greater responsibility in their arts organization, but didn’t necessarily want to assume an executive role.

It got me to thinking that while there is a lot of discussion about exploring new business models for arts organizations like the B Corporation and L3C, maybe there needs to be a corresponding discussion about changing arts job descriptions so that people actually want to assume the roles.

Two issues that seem to rise to the top for executive directors is work-life balance and that the position seems 75% about fundraising and increasing. It may be time to institutionalize the idea that marketing and development aren’t the sole province of those departments by spreading the responsibility around in job descriptions.

I have read a lot of criticism of Michael Kaiser’s ideas, but I have never seen anyone say he is wrong when he advocates for paying attention to the interests of potential donors and connecting them with your corresponding needs rather than viewing them as the source of a lot of money to answer the need you have prioritized.

With the proper training and expectations declared at the outset, marketing, education and artistic staff could take a more proactive role in identifying, engaging and meeting with donors than they do at present. Hopefully freeing the executive director to balance their personal and professional lives, improve their job satisfaction, connect back with the parts of the organization that excite them, and perhaps encourage others to crave their position.

The same can obviously be done with marketing where development, education and artistic, etc. are more active in expressing and advancing the organizational message.

I think people are already cognizant of this interdependent need based on a Twitter exchange between Adam Thurman, Howard Sherman and others this past September.

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Stuff To Ponder: The Fairness and Transparency of Ticket Lines

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Seeing and hearing about people queuing up this year for Black Friday sales on the Monday prior reminded me about an article Tim Roberts wrote on Fullhouses.org this September. In it, Roberts asked if making people line up for theatre tickets was really the fairest way to distribute them.

I am sure the British Commonwealth nations who sponsor Fullhouses.org don’t experience the homicidal shopping frenzy that is Black Friday, but it occurred to me that it is something of a double standard to expect arts organizations to be fairer than retail stores.

It isn’t fair to have to take time off of work to stand in line for theatre tickets, but people camp out for a week to get $50 off a flat screen TV and no one blinks, eh?

Arts organizations are expected to operate more like businesses, aren’t we? Why not make people line up and wait? We may be worried about hurting our relationships with our patrons, but it doesn’t seem to hurt retail stores even when customers know they are being manipulated with sale prices.

Shakespeare in the Park in NYC has a long history of making people line up to get free tickets to their shows. And from their website, apparently people are queuing up before 6 am to be online for the 1 pm distribution. My suspicion is that their policy of randomly distributing seats rather than giving the closest seats to those at the head of the line is probably meant to dissuade people from lining up even earlier. It probably also keeps things from getting as emotionally charged as the Black Friday conflicts.

I did a couple posts on the subject a few years back. Now that I look at their site again, it appears they now offer an online lottery of sorts for tickets. While there are some alternative options, I am guessing your best bet is probably still going to be on the line in the park.

I know there have been some grumblings about the Shakespeare in the Park ticketing process, but I think their long history of requiring people to line up proves it is a viable model.

Back to the original question, is it really important to be fair? People generally have no awareness of whether the organization they are buying from is for-profit or non-profit. They are mostly motivated by the content of the show and tolerate quite a bit of unfairness.

People will go online to buy tickets and are poised to make a purchase at the exact moment they go on sale only to find they are all snatched up in a blink by automated processes. The fact people will still crave those tickets at a higher price on the re-sale sites empowers the very practice people say they despise.

A physical line is actually solid proof of your relative standing. If the line snakes down 5 blocks and you don’t get tickets, you may be disappointed but you could see that there really were 500 individuals ahead of you who had invested more time and effort than you did into making the purchase. While more inconvenient, it would seem a much more transparent and fairer option than online and over the phone ticket sales.

What I think the defining factor is is what your audience values as the basis of your relationship with them. In terms of retailers, the whole relationship is based on price. JC Penny found out people don’t care if they are being manipulated, just so long as the price is right.

So even if most people don’t discern between for and non-profit performing arts events, as a non-profit you can’t pursue a relationship based on price for the simple reason that price conscious people don’t make $1000 donations on top of their ticket purchases.

Patrons of non-profit organizations also don’t generally encounter having all the available tickets disappear in a matter of moments so aren’t likely to crave the transparency of physical lines.

Ultimately, how you handle the process of ticket sales is going to depend on your community and what they value. As a non-profit you are working on showing value in areas retailers often ignore.

There is part of me that thinks that if people are willing to queue up to buy something, either physically or virtually, it is hard to buy the sort of buzz and publicity that generates. It may be ill-advised to try to replace that in deference to some sense of fairness if people are not resentful about it.

Even if they are, it could be the sense of excitement inspiring that resentment. People are more likely to be angry that they have to go to work rather than standing on line to buy tickets if they drive by and there is a line of people threatening to buy up all the tickets before lunch break. Without that line, there is less urgency to see the show.

Before Thanksgiving I was listening to NPR as they interviewed people who had already planned to skip Thanksgiving dinner with their families in order to camp out in line–or they made arrangements to essentially tailgate their Thanksgiving dinner. As much as I thought they were crazy, it was clear even over the radio that people viewed the whole thing as a rite of passage type bonding experience.

I don’t think it was that long ago that people regularly did this sort of thing to get tickets for concerts too. I am betting there is an element of the concert tasting all the sweeter for the effort invested too.

The more I think about it, if you are going to have a physical line up, I think Shakespeare in the Park’s solution of providing a chance to be selected to receive tickets provides the best balance. You get the uncertain convenience of online acquisition balanced by the inconvenient certainty of gaining a ticket of your own merit by lining up early. I am not exactly sure how Shakespeare in the Park handles it, but if they keep the percent of the house they are releasing online a secret, they can vary it according to demand and maintain their attendance numbers.

We DO NOT Need Another Abraham Lincoln

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Last month, Drew McManus posted that we need another Abraham Lincoln. He didn’t go into many details, but I wonder what he could be thinking. Since he suggests replacing Henry Ford with Abraham Lincoln as an exemplar, perhaps he is implying musicians need to be freed from the slavery of assembly line performance where standardization makes one concert interchangeable with any other concert.

All Abraham Lincoln exemplifies is lead from behind disengagement. When Republicans met in Chicago to nominate someone for president, Lincoln was in Springfield content to let his surrogates drum up support. After he was nominated for president, he didn’t even hit the campaign trail, again content to let surrogates like Henry Seward, a former rival for the nomination, speak for him while he sat in Springfield never making a speech.

Heck, Lincoln was so disengaged, he wasn’t even going to go vote on election day until someone pointed out it was his civic responsibility to do so for state and local races also being run that day.

This is not the type of leadership the arts need, especially orchestras. They need leaders who are engaged and involved with all their constituencies.

You may say that this is unfair and the Lincoln was only following the custom of the time and you would be correct. In Team of Rivals , Doris Kearns Goodwin notes that Lincoln’s opponent in the presidential race, Stephen Douglas,

“Disregarding criticism that his unbecoming behavior diminished the “high office of the presidency…to the level of a county clerkship,” he stumped the country…becoming “the first presidential candidate in American history to make a nationwide tour in person.”

Even though Douglas was supportive of the spread of slavery, shouldn’t we look to him and the strength of character it took to break with tradition and face criticism when the country was at the brink of a national crisis as an example of leadership for the arts?

All right, so…. admittedly I am exploiting the fact Drew was a little vague about what characteristics of Lincoln are needed and quoting from a book whose premise is that Lincoln was a good organizer of people rather than a solitary leader to refute Drew’s thesis. Lincoln was faced by challenging circumstances which forced him to alter his position and practices throughout his career. That is what makes it so easy for those with opposing political view points to claim him as their own. It is easy to cherry pick from different periods of his life.

Not to mention that some people’s strength lies in mobilizing capable subordinates while others are really only effective when they step to the fore. There is probably more blame to be attached to bowing to pressure and adopting practices that run counter to your leadership strengths than to resisting popular expectations in order to operate effectively.

The fact that I was being intentionally inflammatory doesn’t diminish the fact that we are at a crossroads in history that will demand changes in behavior. Some aspects of how we operate may never change.

Lincoln stayed at home and didn’t make speeches because he didn’t want to commit to any course of action or give the newspapers anything to misconstrue. Today we expect presidential candidates to make an appearance everywhere, but they still try their hardest not to commit to anything specific and fear what the media may make of what they say.

For his time, Lincoln was actually rather politically savvy and aware of all the different constituencies he needed to please. According to Doris Kearns Goodwin, one of the reasons why Henry Seward didn’t get the nomination was because he spent the summer touring Europe while Lincoln was shoring up his support among key groups.

The changes the arts world need to effect are numerous or else there would be little for myself and hundreds of other arts bloggers and writers to talk about. So in effect we DO need someone like Lincoln as a leader, one who can recognize they stand at the crux of complicated times that requires one to change and respond in a nuanced manner.

There is a lot to admire in Henry Ford. He did much to improve the lives of his workers, but like the parts of his automobiles, they were viewed as parts that could be replaced without any impact to the viability of the company. Ford created a system where the means of production was low skilled labor. That is not necessarily the case with the arts.

Expectations Feed The Disease

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Thai-Klingon cellist Jon (J’onn) Silpayamanant commented today on a post I did on economist Tyler Cowen’s discussion of Baumol’s cost disease as it relates to the arts. He quickly followed up with another comment apologizing because he assumed I was talking about piece Cowen did in 1996 rather than a more recent post on his blog where he makes much the same point.

I started to write a slightly snarky response wondering if Cowen had been more efficient writing the more recent piece because he had better technology and 16 years of thinking about it to back him up or if he was subject to cost disease because it took just as long to write four or five as it did back in 1996, inflation has made his time more expensive and he had to distill down 16 years more experience into a thoughtful entry.

At that point it occurred to me that every time people talk about cost disease related to the arts, they do it in connection with the actual performance. Other parts of creating art has actually benefited from greater efficiencies. Computers aid the design of performance elements as well the transmission and discussion of those designs allowing them to be received and acted upon much quicker than in the past. The marketing and advertising of the performances are likewise aided by technology in terms of design and dissemination. LED lights promise to cut electricity bills by an enormous amount once the ability to control and insure the quality of the light improves.

The quality of the performance itself also has much more potential of benefiting from technology in terms of the amount of research the performers, directors, choreographers, conductors, etc can do in preparation. Every aspect of the performance can be informed by concepts promulgated half the world away. In many respects, the audience is getting a much better product than they were years ago and it is made possible less expensively than in the past.

In fact, they are in a position of being far more informed about a performance they are about to see than a person with the same level of experience with the arts 10 years ago might have. Of course, the whole issue we have is whether the audience values that experience or not.

Had Cowen used this approach in support of his argument that the arts aren’t really impacted by cost disease, I might have been a little more receptive to it.

In some respects, I think that non-profit performing arts have done a great job of employing technology to keep their costs under control, (often to the detriment of the artists, orchestra musicians in particular these days), in comparison with the movie industry where technology has resulted in sky rocketing costs. They employ wide spread distribution options like movie theatres, DVDs and streaming as a substitute for economizing.

It is often said there is a lesson in that for the performing arts but just like the independent film maker, the small arts organization would have to depend on a relationship with a big company with the resources to replicate something on the scale of the Metropolitan Opera and National Theatre broadcasts.

Of course, many times audiences demand the spectacle that technology brings to the movies and some of that carries over to even the solo artists that Silpayamanant mentions. While touring solo might have been a cost cutting measure at one time, that often isn’t the case any more with the huge tours many major acts take on the road.

As an aside, I wonder at the economics of J-Pop groups like AKB48 which has 66 active members spread out across four performing teams. Even though they don’t tour, that is a lot of people to support.

But getting back to the discussion of Baumol’s cost disease, even though people cite the fact it still takes as long to perform a particular work as it did X hundred years ago, it probably really isn’t those two hours of performance that is the costliest part of the process, it is everything else that surrounds it. Because of audience expectations about their experience more preparation precedes the performance, much of which involves salaries and benefits.

As I noted above, technology has brought efficiencies and quality to many parts of the preparatory process. What is it coming down to now is balancing the expectations about the quality of the experience and the cost of delivering it with what people are willing to pay. Right now the focus seems to be on how much of the product can be trimmed back before people notice and become concerned with the drop in what they value.

While this is translating into seeing how many musicians an orchestra can cut before people figure the music is suffering, you see the same thing manifesting in other areas of your life as well. Just try to buy a half gallon of ice cream these days. You will find it is 1.75, maybe 1.5 quarts.

I don’t think that is really a sustainable practice. There should be an corresponding push to shift customer expectations too, and not toward accepting less ice cream and music for the same price, but rather expecting a slightly different sort of experience surrounding a quality performance. I am not sure exactly what it would look like. I know I would like it to be less structured and more educational than what we have now.

We Have To Destroy Our Arts Organization To Save Our Arts Organization

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The news of Hostess Bakeries making good on their threat to liquidate in the face of a baker strike reminded me of You’ve Cott Mail’s “Is bankruptcy the answer for arts money woes” round up from this past August.

Back then Thomas Cott linked to a story about how the Barnes Foundation let everyone believe they were going bankrupt in order to make the case for moving the art collection to Philadelphia easier. Another story recalled how the Philadelphia Orchestra also declared bankruptcy in order to help with their contract negotiations and relieve their pension obligations, suggesting that the stigma of doing so may be dissipating and other orchestras may be following suit.

Cott included an article by Terry Teachout acclaiming the success of the Detroit Institute of Art (DIA) in getting the citizens of three counties to agree to an increase in their property taxes (called millage) in return for free admission to the museum.

There was some talk that millage might especially be the wave of the future for funding the arts.

Yeah, not so fast. According to Judith Dobrzynski, the DIA might want to give a thankful prayer for their blessings. Residents of Ann Arbor, MI voted down millage to support a comprehensive public art project.

With that in mind, I wouldn’t necessarily count millage out as an answer. I suspect the biggest difference between Ann Arbor and Detroit was that DIA is a specific, visible entity, the benefits of which are easy to experience by walking in the door. If they were forced to close, it was clear what would be lost. Ann Arbor was looking to support art yet to be created which can be more difficult to become mentally, emotionally and socially invested in.

What I would really like to see is an arts organization successfully sell a community on a wide-ranging public support option like millage in the absence of a scenario of imminent demise. I have seen so many appeals in the face of an apocalypse that I wonder if it is even possible to rally significant community support for a healthy, stable arts organization.

Have we trained people only to respond to dire predictions? Or perhaps they have trained us that they will only respond to appeals couched in those terms.

Bankruptcy and tales of woe really isn’t the most constructive way to develop a relationship and confidence from your community. It impacts credibility and people soon become inured to news of financial crises. In this Hostess liquidation, the only person who wins is Little Debbie. (Come to find out, Hostess owns Drake’s Cakes)

The best evidence that you will not mishandle donated funds is that you are never in the position of telling people about the void that will open in their lives if they don’t rally to support you. It is harder to suggest people should have confidence in your business plan and financial practices if you are in dire straits, but more people seem ready to increase their giving in these instances because it is easier to be passionate in short bursts.

Yes, I know Joni Mitchell told us we take the things we love for granted many years ago, but there is nothing to say we can’t rally to change that behavior.

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Will Typecasting Ruin New Zealand’s Career?

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I was reading today that the New Zealand post will be issuing legal tender coins commemorative coins for the upcoming Hobbit movie. This appears to be the first issue of coins associated with a popular culture icon (unless you count those issued for the All Blacks rugby team whose haka performance is iconic of itself).

I was both filled with a sense of amazement and concern about this. The amazement was based on the concept that an entire country could find itself identified so closely with a non-native cultural icon. The built in fan base of millions of Tolkien enthusiasts is proving something of a boon to the country which hosts tours of the many sites that appeared in the Lord of the Rings movies. While there was some digital enhancement involved in many parts of the movie, the inspiring natural beauty of the country depicted in the movies is there to be experienced.

I am sure there are many New Zealanders who are tired of foreigners trampling about looking for movie locations and reciting dialogue from the movies, but on the whole from what I have read, the country has a general sense of pride in the attention the movies have brought them.

My concern is based on the exact same thing–that the country find itself identified so closely with the movies that everything else it has to offer becomes eclipsed. Believe me, where arts and culture is concerned, the country has plenty to offer. Of the last eight seasons in my theatre, easily half of them have featured artists whose appearance was due to support from Creative New Zealand.

Here in Hawaii you can tour the locations that appeared in Lost and Hawaii 5.0, but the state’s identity isn’t closely tied to those television shows. After the planes stopped flying on September 11, 2001 and tourism dropped during the economic downturn, there has been a sense that the state needs to be known for more than just tourism, too.

I am sure there is plenty of discussion in New Zealand along the same lines. Fame and reputation can be a double edged sword that enhances your life in the short term but can be detrimental in the long term. Actors run into the same problem when they play an iconic character and then find they are inevitably cast as that same type the rest of their career. Arts organizations cultivate an aura of prestige that attracts wealthy patrons but earns them the perception of being elitist.

Of course, one benefit of the Lord of the Rings and Hobbit movies is that New Zealand has a much stronger infrastructure for making and distributing films so perhaps the world will become more familiar with the creative and cultural richness of the country through movies and other digital media.

I think the country has enough diversity to offer it won’t face the danger of being typecast as Tolkien’s Middle Earth. The stereotypes other countries and racial groups have to face are bad enough, imagine people expecting everyone from New Zealand to either be an elf, dwarf or hobbit. (Kiwi are too nice to be uruk-hai.)

Yes Virgina, There Is A Cost Disease

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Over on the Marginal Revolution blog, Tyler Cowen opines that the arts are not impacted by Baumol’s cost disease.

2. I do not see the arts as subject to the cost disease very much at all. As for the “live performing arts,” the disease seems to afflict the older and less innovative sectors, such as opera and the symphony. There is plenty of live music these days, it is offered in innovative ways, and much of it is free.

I was a little confused by this point since all it really proves is that people aren’t charging for live music and doesn’t really address that there are costs involved with the performance.

Admittedly, he does seem to imply that innovation in the way the artistic product is offered makes all the difference. Back in June, I noted that Jon Silpayamanant made the point that there are alternative ways to make money when offering an experience.

Cowen goes on to say, (my emphasis)

“4. In many sectors of the arts, especially music, consumers demand constant turnover of product. Old music becomes “obsolete” — for whatever sociological reasons — and in this sense the sector is creating lots of new value every year. From an “objectivist” point of view they are still strumming guitars with the same speed, but from a subjectivist point of view — the relevant one for the economist – they are remarkably innovative all the time in the battle against obsolescence. A lot of the cost disease argument is actually an aesthetic objection that the art forms which have already peaked — such as Mozart — sometimes have a hard time holding their ground in terms of cost and innovation.”

I will grant him that some of the cost disease problems can be attributed to an adherence to aesthetic ideals rooted in the past and a resistance to innovation.

But I am not sure if consumers are truly demanding a constant turnover in product. There is reluctance to sample anything new and unfamiliar among consumers. This isn’t necessarily confined to symphony and opera where you might argue the new material is being presented to the wrong audiences (i.e. older existing audiences whose tastes are already set).

There is as much a sense of risk aversion among audience as among content creators. Broadway shows are often revivals or derivative of works that have already proven their success. Playwrights bemoan the fact that regardless of their proximity to Broadway, few theatres are producing new works.

The same is true with movies. The most well attended movies this summer were based on comic books. Even the plots of those stories had been revamped numerous times in the comics format. The plan for the adaptation of J.R.R. Tolkien’s The Hobbit went from two movies to three leaving fans to wonder, if the three books of the Lord of the Rings took three movies to tell, (albeit with much left out), how is the one book of The Hobbit going to be stretched to three?

A fair bit of emotion and nostalgia is responsible for perpetuating the conditions which contribute to Baumol’s cost disease. One of the points Cowen makes reinforces this:

“Live music” may seem like it doesn’t change much, but lifting the embargo on Cuba would boost the quantity and quality of my consumption of spectacular concert experiences, as would a non-stop flight to Haiti.

Opportunity rather than innovation is the only thing having any bearing on the quantity and quality of his consumption. It isn’t necessary for Cuban musicians to made any changes whatsoever since 1962 when the embargo began, they just need to be available.

There is an element of his aforementioned “aesthetic objection that the art forms…have already peaked” in this point as well. It is difficult to take an entirely objective view of a product or service possessing an artistic element.

If quality of product could be maintained by paring down performers and replacing them with technology, The White Stripes would have been a model everyone emulated. As interesting as the band’s work might have been, there wasn’t a rush to form duo performance groups.

It may be a difficult to define Platonic ideal, but there is a minimum one can offer before the perception of the experience suffers. Ultimately, because it is his area of expertise, I might find myself having to concede Cowen’s point in the face of a more detailed argument. But I think given that the resources necessary to provide the central experience remain generally constant, Baumol’s cost disease does indeed impact the arts significantly.

As for the solution, at this point I keep coming back to Jon Silpayamanant’s idea that ancillary elements surrounding the experience need to be developed in order to support it.

What Pricing Is Right?

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Back in June the MIT Sloan Management Review had an article in pricing strategies. The bulk of the article discusses research on practices of companies that have sales forces that goes out to solicit business and has some degree of control over the pricing.

However, the research found some basic elements of price setting that are common regardless of industry and geography. (my emphasis)

1. Cost-based pricing. Here, pricing decisions are influenced primarily by accounting data, with the objective of getting a certain return on investment or a certain markup on costs. Typical examples of cost-based pricing approaches are cost-plus pricing, target return pricing, markup pricing or break-even pricing. The main weakness of cost-based pricing is that aspects related to demand (willingness to pay, price elasticity) and competition (competitive price levels) are ignored. The main advantage of this approach is that the data you need to set prices are usually easy to find.

To a certain extent, this is the pricing strategy used by many non-profit organizations–and their critics. I say it is used by critics of non-profits because one of the common refrains one hears is that if non-profits can’t make enough to support themselves, they should be left to fail rather than supported by government funding.

Non profits use this approach to determine what level of revenue they need to cover their costs in the context whatever other funding sources (donations/sponsors) exist. But as the authors say, it can ignore the level of demand that may exist potentially increasing the revenue stream if the price were set higher (or perhaps ignoring the lack of demand and setting the price too high.)

2. Competition-based pricing. This approach uses data on competitive price levels or on anticipated or observed actions of actual or potential competitors as a primary source to determine appropriate price levels. The main advantage of this approach is that the competitive situation is taken into account, and the main disadvantage is that aspects related to the demand function are again ignored. In addition, a strong competitive focus in setting prices can exacerbate the risk of a price war.

I am not aware of too many price wars among arts organizations, but it can be a mistake to taking your pricing cues from competitors. For one thing, just because you perceive your product to be of equal value to your competitor’s doesn’t mean your customers necessarily do.

3. Customer value-based pricing. This approach, which is also often called “value-based pricing,” uses data on the perceived customer value of the product as the main factor for determining the final selling price. Instead of asking, “How can we realize higher prices despite intense competition?” customer value-based pricing asks, “How can we create additional customer value and increase customer willingness to pay, despite intense competition?” The subjective and quantified value of a purchase offering to actual and potential customers is the primary driver in setting prices. Customer value-based pricing approaches are driven by a deep understanding of customer needs, of customer perceptions of value, of price elasticity and of customers’ willingness to pay.

The advantage of customer value-driven pricing approaches is their direct link to the needs of the one constituency paying for the respective goods or services: the customer. The big disadvantage of such approaches is that data on customer preferences, willingness to pay, price elasticity and size of different market segments are usually hard to find and interpret. Furthermore, customer value-based pricing approaches may lead to relatively high prices, especially for unique products. Though that may seem optimal in the short run, these pricing approaches may spur market entry by new entrants or create a risk-free zone for competitors offering comparable products at slightly lower prices. Finally, it is important to note that it is an error to assume that customers will immediately recognize and pay for a truly innovative and superior product. Marketers must educate customers and communicate superior value to customers before linking price to value. Customers must first recognize value in order to be willing to pay for value rather than base their purchase decision solely on price.

Despite these shortcomings, many pricing scholars consider customer value-based pricing to often be the most preferable way to set new product prices or to adjust prices for existing products

Now I don’t have any real evidence that non-profit arts organizations use customer values as the basis of their pricing decisions, but damned if the language the authors use doesn’t match the language being used in discussions of arts management issues: increasing value and customer willingness to pay for it; the necessity of understanding needs of customers/community; high prices for unique products (unique at least from the NP org point of view); audiences not recognizing truly innovative and superior product; need to educate customers/community about the superior value of the artistic product.

Factor in movies/internet/video games as competitors offering what is perceived to be comparable product with lower monetary/social/time, etc. costs and it sounds like they are describing a the situation facing the non-profit arts and culture industries.

Except that these factors are rarely connected with discussions of pricing for non profit arts organizations. While creating the perception of value in audiences does often enter the discussion, I don’t know that it is necessarily accompanied with a “deep understanding of the customer needs, of customer perceptions of value, of price elasticity and of customers’ willingness to pay,” but rather with hopes and assumptions. How many pricing decisions arts and cultural organizations make every year are based on this understanding?

This may be due to lack of will as much as lack of funds to conduct the research necessary to achieve the deep understanding. Since customer value-based pricing seems to be recognized as the best approach, perhaps research into the intrinsic value of the arts should include a greater focus on pricing to see how value and pricing are connected.

Though I am not sure if the knowledge will be of practical use to a significant number of organizations. The authors point out the information is difficult to gather and interpret. I imagine the results will probably be specific to an organization or geographic region.

Tweet Me Your Gift Now

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Non-Profit Quarterly (NPQ) had a piece today encouraging people to pay attention to the fact that Chinese are using social media service Weibo to give directly to the needy. The NPQ piece is in reaction to a Washington Post article about how recent charity scandals had turned a lot of Chinese off from giving to the state approved charities. Now people are using services like Weibo (China’s Twitter/Facebook hybrid social media service) to give to people directly, even though it is illegal to do so.

The scandals have shaken public confidence so badly that the Chronicle of Philanthropy reported in June that giving in 2011 was down to $7.9 billion from $9.5 billion in 2010. The Chronicle’s numbers come from a story on the state run China Daily which attributed the drop to a number of factors in addition to the scandals, including the economic downturn and general giving practices in China.

“In China, people’s willingness to give is ‘disaster-driven’ while in the US, donating is a habit.”

He added that the Chinese philanthropic sector’s over dependency on corporations could be another possible explanation to understand the dramatic changes in donations.

“Our research shows that companies, especially private companies, are dominant contributors. Last year, many export companies suffered from the global economic downturn, so they didn’t have much money to donate,” said Deng.”

What interested most about these stories wasn’t so much that people are using social media to give. We already know that is becoming a bigger factor in giving in the U.S. and recent laws are making it easier to crowd fund projects.

What I was paying attention to was that people were giving via social media even though they acknowledged that it is no more transparent and just as ripe for exploitation as giving to an official charity. In fact, some Chinese observed that personality and good looks seemed to motivate giving more than need in a few cases.

There seemed to be a psychological factor inherent to giving to someone directly that gave people a higher degree of confidence in the act of donating.

The US doesn’t have scandals the size of those in China, but there is still a lot of conversation about administrative overhead and Non Profit CEO salaries. Even though these criteria are generally unfair, they can still motivate giving decisions.

There is an old adage that people don’t give to organizations, they give to people. Based on these stories about China and some general observations I have had about the way people generally behave in the US, non profit arts organizations may find they need to provide giving mechanisms that give people a much more immediate sense of connection and response than in the past.

In addition to the ability to give online, an arts organization may need to allow people to give via their smartphones so that patrons can donate during a performance and immediately gain the sense that they are supporting that actor/singer/dancer that just came onstage. If the person walks off stage before they can give, it may be too late.

Two years ago during a public radio fund drive I was so moved by the quality of the show I was listening to, I pulled over into a parking lot to make my pledge because the show was almost over and I felt like I needed to make my pledge before it ended. There wasn’t really any reason not to wait until I got home because the money was going to the station and not the show directly and I already knew I was going to give again that year—But I just had to show my support for that show!

As people become accustomed to giving to things like Kickstarter projects, non profit arts organizations may find themselves having to solicit donations specifically for each project they plan to do rather than based on a general promise to do quality work as has been typical.

Arts organizations may be faced with the dilemma of positioning their programs this way. Restricted donations have always been a problem for non-profits. Do you want to be faced with having every $25 donation restricted to a specific project because people are more motivated to give to something to which they feel a direct connection?

You might as well have a for-profit structure if you are going to have market demand dictate what is funded, eh?

Info You Can Use: If You Missed Your Chance To Steal It Before

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While Oscar Wilde may have said, “Good writers borrow, great writers steal,” and blogging by its nature does involve citing others quite a bit, I generally try to avoid having my blog entries involve someone else’s work entirely.

However, occasionally someone provides information that can prove so valuable, it pretty much bears repeating entirely. Last month Thomas Cott assembled a series of links in his daily email which he titled, Steal This Idea.

Many of those he linked to posted entries urging people to steal their ideas, including Trisha Mead on 2AMt , the Association of College Unions International’s Steal This Idea contest and the Please Steal This Idea blog.

After reading this series of articles, you could almost forget that companies are actually concerned about preserving their Intellectual Property rights.

There are a lot of great ideas for the arts in these links. I must confess however that one which resonated very closely with me was an article from the Library Journal (also titled Steal This Idea) which talked about how the Hartford Public Library solicited ideas from their patrons and created a series of library cards people could pick and choose from.

This is a great idea for cultivating a sense of ownership among arts patrons and subscribers. However, the reason it resonated so closely with me is because I actually have kept every library card I have owned since I was a kid. And since I have moved around a fair bit in my career, my collection is between 10-15. Had those libraries offered a choice of more personalized cards, I would have probably “lost” my card frequently so I could add to my collection.

One interesting idea that Cott hadn’t included was covered by Sarah Lutman of the Speaker blog. She discussed the Great River Shakespeare Festival’s (GRSF) decision to sell 10 year bonds to fund their organization. The board of directors authorized the sale of 100 bonds at $5000 each. As of a month ago, they had sold 39.

Though there is some hope that at the end of the 10 year period, people will roll over or donate the proceeds of the bond to the organization rather than calling it due, GRSF is prepared to pay 4% annually on the bond. And they may choose to repay the bond at the end of the term rather than having it roll over. Ownership of the bond can be transferred.

The legal and filing fees for Minnesota were under $2000. It may be more in your state. It is an interesting idea to get people literally invested in your organization. There is some precedent for this sort of thing. The Green Bay Packers football team is a non-profit corporation and has famously offered stock to support their operations.

Fans grab shares when they are made available mostly for the pride of claiming ownership because the team doesn’t pay dividends. How much better is it then to be able to proudly invest in your favorite arts organization and actually be promised a financial return on top of whatever benefit the organization has to the community.

Misunderstanding Your Competition

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To pick up from my last post about the Set In Stone report, the one aspect of the research I was intrigued by was their survey of people’s perceptions of the impacts (or lack thereof) of a new construction project.

As you might imagine, those who perceived themselves to be direct competitors were the least enthusiastic about a new building project. However, the groups who were most enthusiastic were those who were in the same district as the project, but didn’t view themselves as competitors.

Nope, No Impact Here

The report writers note both the positive and negative impacts of a new project- It might compete for audiences and revenues on one hand, but could also bring additional vibrancy to the area attracting businesses and traffic. Interestingly, the perceived impacts of a new project were pretty low.

• No higher than 28 percent of organizations in any subsample believed any change in their attendance was due to the new project opening; that subsample was the most closely linked to the project (competitors in the same district). The full sample result was only 12 percent believing the project opening affected their attendance.

• While 40 percent of competitors in the same district believed the project opening had an effect on new businesses opening in the area…Only 23 percent of the full sample believed the project opening was the key cause of new businesses in the area.

However, in terms of general impact, people were quite positive in their outlook about the project.

• When the question about community impact is posed in general terms, dramatically positive views are expressed. The question “Do you think the project makes the city a more attractive place to live?” generated a uniformly enthusiastic response, with the full sample generating 88 percent positive responses, and competitors within the same district reporting a 96 percent positive response.

There was also a lot of enthusiasm about the impact the new project would have in the community in advance and immediately upon the completion. However, according to the report, after the completion, enthusiasm dropped about 8% for the overall sample. However, for the group that was most enthusiastic–those in the same district who didn’t view themselves as competitors that I mentioned earlier–their optimism about the impact on economic development dropped 16 points.

I should note that the report writers emphasize that it is difficult to separate general economic conditions from project specific conditions as factors in the decline in optimism. They don’t know if the decline is due to problems with the greater economy or specific to the projects.

Foes Are Just Friends Who Compete With You

What was also interesting to me was the perception of competition versus collaboration people had in relation to projects. Those who viewed themselves as direct competitors were most likely to view the project as creating a more competitive environment while those who were located in the same district but did not view themselves as competitors felt the project created a more collaborative environment.

And yet,

Ironically, the group with the highest percentage of organizations believing that cultural organizations feel more competitive (competitors in the same district, also had the most optimistic view about increased tourism (52 percent believed it had increased). Thus, there is no evidence that community organizations link their views about changes in tourism to their views about the effect of the project on the competitive/collaborative climate.

The section of the study about competitiveness was very intriguing to me because so much of it was based on perception rather than reality. Just because people didn’t identify themselves as competitors, doesn’t mean that is really the case. The study found proximity was often a factor in identifying a project as a competitor, even if the cultural discipline didn’t match. You might expect that a museum might view a nearby performing arts center as a competitor.

Yet the study found (and I paraphrase for clarity) that a slightly higher percentage of those who identify themselves as non-competitors were located in the same district and were a cultural discipline match for the expansion project. The report authors state this “is inconsistent with expectations and inconsistent with the results observed for the “competitor” subsamples.”

You Can Have My Audience, Performers and Employees, Just Leave The Money

It made me wonder if there was a degree of wishful thinking/willful blindness among other cultural organizations that the expansion project represented a threat to them. These results left me wondering and wishing the survey had included data on whether local conditions improved or not in the wake of a project. I suspect given the scope of the study, they were unable to assemble a dependable data set to make this comparison.

Still it raises a lot of questions about how accurately cultural organizations, and I daresay businesses as a whole, assess the impact of developments on the economic conditions of their communities. I suspect the assumptions arts and cultural organizations make are little different from those other businesses make about the impact that will result upon the arrival of a big box retailer like WalMart, Best Buy or Home Depot.

Not surprisingly, money seems to be the dominant factor. The study found that the greater the funding for the expansion project came from non-local sources, the less people expressed concern that the environment had become more competitive. The perception of the economic climate seemed to be based mostly on whether the expansion project was making it more difficult to fund raise rather than whether the project was competing for audiences or talented artists and employees.

I wonder if this is something of a statement on the relative importance/availability of funding versus audiences and talent for cultural organizations: People are more easily replaced than money.

Info You Can Use: Outside Audits And You

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During the summer many non profit boards of directors suspend their meetings due to the difficulty of scheduling meetings around members’ vacations. When meetings start up again in the fall, it may be a good time to think about revisiting organizational policies.

Using the Sarbanes-Oxley Act, which currently only applies to publicly traded companies, as a guide Independent Sector (IS) and BoardSource have drawn up a checklist of good governance practices to implement.

There is also a link to a more expansive discussion of the topics in the checklist you may wish to read.

While the act currently only applies to public companies, financial impropriety in the non-profit sector has lead many to explore how sections of the law might be applied to non-profits or to suggest the creations of similar rules for non-profits.

The bulk of the rules apply to auditing and financial disclosures though some deal with conflict of interest, record retention policies and whistler blower protections.

One of the biggest challenges in applying the recommendations from the law is that while publicly traded companies have to pass certain milestones in terms of size and assets before going public, non-profits come in all shapes and sizes. An outside audit is really only practical for some large non-profits (and required for those receiving more than $500,000 in federal funds.)

Most non-profits should at least have an independent audit committee, but as the article notes, many smaller non-profits will have difficulty finding a qualified people to be treasurer, finance committee and audit committee and good governance requires there not be significant overlap.

For those who do use an outside auditor, though the Act only requires the lead partner of the auditing company change every 5 years, IS suggests the company be changed every 5 years and that the company not provide any other services, except tax return preparation as pre-approved by the board, to minimize conflict of interest.

For those organizations using an audit committee, it is suggested none of the members of the committee have any financial/business interest with the non-profit.

The very bare bones, basic criteria for a board that IS suggests is that they all receive training to become literate enough to understand the organization’s financial documents. IS says it is important that when the organization signs off on their 990 that: 1- the 990 is actually completed comprehensively and accurately, something that is infrequently done; 2- that the signature actually reflects an understanding of the organization’s financial condition.

I have talked about conflicts of interest policies in the past and the IS document doesn’t really discuss this in as much detail as the financial disclosure.

One thing I was not aware of and wanted to share is the whistler blower protections. You may be aware that it is illegal to take any retributive actions against those who report misconduct: firing, demotion, harassment, passing them over for promotion. What you may not know is:

“Even if the claims are unfounded, the organization may not reprimand the employee. The law does not force the employee to demonstrate misconduct; a reasonable belief or suspicion that a fraud exists is enough to create a protected status for the employee.”

I wasn’t aware that the criteria to achieve whistle blower protection was based on a reasonable belief rather than requiring some sort of evidence. Perhaps I have been watching too many crime dramas–or perhaps not enough of the right types.

In any case, it is important to have good clear policies about employee conduct, financial and accounting practices, conflicts of interest, records retention (which includes email and voicemail) in place long before any of these things become issues.

No Simple Solutions

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While I was out in the middle of the Mongolian steppes gazing out from my yurt, I happened upon a copy of the Oxford Business Group’s report on Mongolia in the dining hall. I put aside the novel I was reading and devoured the report. It was intensely interesting to me to read about all the factors that contribute to the emergence of a developing nation. In many respects, I saw some parallels to the arts and culture sector.

As I mentioned yesterday, one of Mongolia’s greatest assets is its land. The people are largely nomadic and their large herds of horses, sheep, goats and cows benefit from the grazing land. Tourists such as my friends and I come for the natural beauty. And the country has large mineral wealth.

There are many factors that must align for the country to be economically successful in each of these areas. The banks must have enough capital to support investment; insurance companies must have the resources to insure the industry; the government must be stable and generally unified in its vision; people must be confident that laws will be fairly applied and agreements honored; work force must be well trained and industrious; a quality transportation infrastructure must be in place.

This is no small task for a country that moved from Soviet style communism to a parliamentary republic in the early 1990s. The report mentioned that even countries like Canada which has a more mature and practiced economy and political system were challenged in trying to exploit their mineral wealth.

One of the things the report made clear is all these elements are interrelated. Success depends on addressing deficiencies in all theses areas and that balance is necessary. For example, there is a growing concern that the rise of the mining industry with its good salaries not develop to the detriment of other industries like manufacturing and tourism leaving the economy too dependent one segment. The impact of copper prices falling sharply a couple years ago is still fresh in people’s minds.

In the same respect, problems faced by the arts and culture sector in the U.S. and elsewhere won’t be simply fixed solely by achieving one of the following: more government funding, better cultural policy, more corporate donations, better board governance, changes in foundation policy, arts education in schools, new business model or marketing to younger audiences.

Its all of these and no one thing. We all generally know there are no simple answers, but it is difficult to remember when we are told the solutions to our problems can be achieved with a simple pill; in as little as 30 minutes a week; or just cutting/raising taxes.

Certainly when you are operating in perpetual crisis mode, or at least a low grade state of emergency as seems to be the case in the arts and culture sector, thinking the solution lies in achieving progress in one fairly significant goal provides the hope you need to carry on.

While it shows the reality of the situation to perhaps be more overwhelmingly complex, in the context of the factors necessary for developing the Mongolian economy, it is obvious that a more holistic and balanced approach to improving the operating environment is necessary.

It only makes sense that financing, infrastructure, law, education, etc are all important to a developing country. Progress won’t be made if one area is deficient. Trying to convince others to stop trying to advance conditions and policies in other areas and devote their time to what you think is important may ultimately be counter-productive.

Something to remember if you are making the rounds of conferences and such this summer and you are getting a lot of messages about what is absolutely the most important thing to do.

Info You Can Use: Be Careful of Social Couponing

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If you have been considering using social coupons to increase attendance at your events and attract new customers, you may want to read a study covered last month in MIT Sloan Management Review (h/t Drucker Exchange) that noted the repercussions of a badly designed deal could last for months.

The authors, V. Kumar and Bharath Rajan tracked three businesses for a year after they started their social coupon campaigns. The three businesses did attract large numbers of new customers with the campaigns, but experienced significant losses during the month they offered their deal, in some cases two or three times their normal net monthly profits.

“Such losses would not have been so serious if the businesses were able to achieve higher revenues and increased profits in future months. However, this was not the case. Despite their best marketing efforts, the three businesses had difficulty retaining most of the new customers who were attracted to the coupon offers. Based on our analysis, it will take the car wash service and ethnic restaurant 15 and 18 months, respectively, to recover from the profit shortfall following the coupon launch; for the beauty salon and spa, the recovery period for the coupon campaign at current business levels was projected at more than 98 months, or eight years.”

Now granted, given that most non-profit arts organizations lose money on many of their events, these facts may hardly be a deterrent to using social coupons. However, arts organizations do seek new audiences. The authors state that basic design of social coupons aren’t really conducive to new customer acquisition, but steps can be take to mitigate the losses of a campaign.

One approach may be to upselling or cross-selling products and services. Many theatres have tiered pricing on their seating so being able to upgrade to center orchestra may seem like a good deal to some attendees. If theatres are trying to attract a younger audience, they may want to cross sell tickets to their edgier space whose ticket prices are comparable to the discount the person is paying.

In other words, a person comes in with a 50% coupon for a $30 ticket and the theatre asks if they would like a ticket for a later date at the other space where the top price is $20 for the same $15 price. This approach helps to retain the person for another performance for what is probably the average ticket revenue at the other space.

Another approach the article suggests is limiting the size of the discount and the conditions under which it may be redeemed. They mention that the restaurant in their study later offered 30% discount on two days a week and reduced their losses to close to zero.

They also suggest only offering the coupon to new customers, but I am personally ambivalent about that. I think that sours your relationship with existing customers. If you have ever seen those cable commercials that offer tons of great channels at a low price –but only to new customers–like me you may have been a little annoyed wondering what benefit you will ever derive for having paid your bill on time for 5 years. To my mind, even if it isn’t the same benefit, existing customers should feel like they are rewarded for loyalty if the new kids are getting some sort of incentive to participate.

Embracing The (Cost) Disease

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Hat tip to Thomas Cott for bringing Jon Silpayamanant’s intriguing refutation of the idea of Baumol’s Cost Disease being the doom of arts organizations.

Silpayamanant correctly notes that sports teams have the same challenges as arts organizations. Just as it still takes just as many people to perform Hamlet as it did 100 years ago, improvements in technology haven’t brought efficiencies to baseball allowing them to play the game with only 6 people on the field. I was flabbergasted to learn just how small a percentage ticket sales comprise sports’ teams total revenues.

“The NFL, the most profitable of the Leagues, takes in 20% of its total revenue through Gate revenue while the MLB, the next in line in profitability, took in 35% in 2006 (down from 40% in 2001). The NBA gets roughly 33% of its total revenue from the gate.

[…]

So we have a performance income gap in the Sports Industry which is practically no different than the “structural deficits” found in Classical Music. But the former is considered “profitable” while the latter is increasingly being referred to as being in crisis. What has made up the shortfall in performance revenue for sports then? The most obvious revenue sources are through corporate sponsorship, merchandizing, and most importantly for the purposes of this post–Broadcast licenses (i.e. Television).”

As Silpayamanant points out, only a few sports franchises are profitable but thanks to revenue sharing “(the highest earners will give a disproportionate amount of their gross to distribute amongst the lowest earners), the field as a whole remains profitable.”

Now given the whole “non profit” element, I am not sure a ticket revenue sharing arrangement among arts organizations is viable. Television as a medium looks to be on the wane, but content licensing through online and other media might be viable if anyone figures out a workable model.

Merchandising might hold promise if arts organizations in a community or across a discipline got together and created some interesting products or services to distribute/license and then had some revenue sharing related to it.

But will arts organizations have the discipline and will to bond together toward a common cause and then have the patience to let their plans come to fruition?

A commenter on Silpayamanant’s blog reminds us that professional athletes were not always well paid and often had to work in retail during the off-season. In one of my very first blog posts I linked to Chris Lavin’s 2002 speech, “Why Arts Coverage Should Be More Like Sports,” where Lavin recalls that Wellington Mara who owned the NY Giants football team would give Lavin’s father piles of tickets in the hope of getting people to actually attend the games.

Success didn’t happen in the course of a couple seasons for the sport leagues, nor would it come quickly for any cooperative effort between arts organizations. One of the first hurdles would be a change in operational culture. Lavin’s call for arts organizations to be more open and transparent to the media is echoed today by people calling for arts organizations to make themselves more open and accessible to audiences.

Given the frequent questioning of the validity of the non profit business model for arts organizations these days, perhaps a league of arts organizations focused on monetizing anything that isn’t nailed down can comprise a viable way forward. I mean, heck, many orchestras are already running parallel to sports leagues with the threats of lock outs and hiring non-union players.

Thus Rises The Individual Curator and Commissioner

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There was an intriguing piece on Wired last week (h/t Thomas Cott) about an alternative approach to funding events via Kickstarter. Andy Baio talks about funding record projects, conferences and festivals by essentially lining up the speakers/performers/resources and then seeing if anyone is interested in buying tickets to the proposed events/project. If there isn’t enough interest, it doesn’t happen.

What was most interesting to me is how this type of approach really empowers an individual to curate a project. You may not be an artist yourself, but you have an idea of what combination of artists and concepts might be compelling and then can set out to bring it together.

While this is sort of my job already, there is something of an expectation that there will be balance in those I invite. I have a certain responsibility to make sure my facility and events are being run in a fiscally responsible manner. An individual isn’t necessarily saddled by those expectations. They can do a project as a one off and no one is concerned about whether their activities are serving the needs of the community.

Makes me wonder if this might be a potential mode of operation for the future. One of many that might replace the non-profit arts organization.

If taken at its face, this approach seems shift some burden to the artists/speakers being invited. If the event doesn’t happen, will they get paid? While Baio doesn’t explicitly mention it, I am guessing you would have to provide some sort of guarantee of payment to the artist/speaker regardless of whether the performance happened or not. Baio alluded to this in a couple places, including his requirements for these projects.

Projects like these have three big requirements.

Strong, achievable concept. Commissioned works should be scoped down to something realistic, because you’re paying for their time, but high-concept enough to capture the excitement of other fans.

Organizer. The funding may come from the crowd, but there needs to be a single person managing the project and handling all the logistics and small details.

Due diligence. The organizer will need a firm agreement from the artist, committing to a timeline, payment, and any other demands. Also, if the project results in a tangible work, determine who owns the rights to it before you start raising money.

While most artists and speakers like being paid, they like to be seen and heard even more so there is also some incentive for them to help promote the cause. It may not occur too frequently at present, but it could certainly become commonplace if the practice of running a project up the flag pole becomes more wide spread.

The other thing, of course, is that it turns your audience into much more active advocates for the work because there is a possibility it won’t happen. We know that many audiences today, especially among the younger generation, tend to wait to see if something more interesting might come along before buying a ticket. Since the performance will occur regardless of their commitment, there is no incentive to commit. The threat that the event might not happen can garner an increased investment in its success even if it is only that people continually check the progress of the funding to see if the event will happen.

A commenter to the piece pointed out a service in Brazil which rewards the early adopters. It sells refundable tickets to a show until the minimum is met. Once the event has secured its funding, it starts selling non-refundable tickets and apparently starts reimbursing the purchasers of the refundable tickets up to the their full purchase price.

To Close Or Not To Close, How Much Debt Is Too Much?

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A little over a week ago I received the news that one of our partner theatres decided to close its doors. That sent the rest of us scrambling to contact artists to see if we could salvage the tours with which the organization was involved.

The board has said they want to revise their business plan and perhaps reopen in 2013. In the meantime, come this Friday, the entire staff is out of a job. I am wondering if they will be able to resolve all their grants and settle other business in that time.

A conversation I had about their closing has had me thinking over the last week. When I read the news about their closing, I was somewhat relieved to learn the organization was $200,000 in debt. Given the debt amounts you usually see associated with failing arts organizations, this is relatively small. Though it is also more significant for their $1 million annual budget than for those with $10 million budgets.

Referencing this debt, a colleague asked if they couldn’t have simply gotten a line of credit from a bank to enable them to stay open. This got me thinking about how you determine when it is time to cease operations.

Given that they intend to revise their business plan and hope to restart operations, would it have been better to attempt a reorganization through the next season rather than lose momentum with their community and funders by closing?

Or given that their debt is about 20% of their operating budget, did they do the responsible thing by deciding to close in the face of what I assume to be dwindling attendance and fundraising prospects? Why saddle your new business plan with the burden of another year’s accumulated debt?

In the last couple weeks I read an article/blog post that criticizes a non profit board of a YMCA for being oblivious to the state of their failing organization. The article suggested the board should have seen the warning signs had they been paying attention to the financials.

Our partners were clearly paying attention and decided to do what they felt was the responsible course of action. There isn’t really any clear cut formula which dictates that you should close your business when your debt reaches a certain ratio of your budget because there are so many situational variables each organization faces. What one company can recover from may mark the start of a downward spiral for another.

I am curious to know at what point people think organizations need to close. Does seeing other non-profits rack up huge debts before closing or declaring bankruptcy inure us and make organizations more apt to keep operating under the assumption they haven’t reached that point of no return yet?

Right People, Not Right Product Make A Great Company

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So as something of a follow up to my post earlier this week asking if foundation boards embrace non-profit values, I wanted to point to an article about what private enterprises can learn from non-profits.

The five points the article emphasizes are connecting with the community, understanding what motivates your employees, creating long term value, valuing people over the program or product and improvising.

Many of these points are representative of what the arts can bring to private businesses. While I don’t think the arts are exemplary in the diversity of employees and audiences it serves, improving that situation is a major topic of conversation and can help lead others to the questions they should be asking about themselves.

Likewise, while it may seem that non-profits don’t have a sterling record in respect to overworking employees, they do understand what motivates people to dedicate themselves to a cause in return for little material reward.

Lately one subject that seems to come up frequently is the idea that private companies have an unhealthy focus on short term gains at the expense of creating long term value. Many companies are starting to see that focusing on corporate social responsibility (CSR) is crucial for doing business.

It almost seems that if the non-profit sector can come up with an effective program to engender even a partial shift toward a longer view, a great service will be rendered.

The one point I especially liked in the article was that great people have more value to a company than great products and services. I think it can be easy to forget that when you are being evaluated based on the numbers you achieve (which is especially the case for non-profits’ administrative cost ratios)

4. The right people (not the right product or program) make for a great organization (Chris Pullenayagem, Director, Christian Reformed Church)

Many private (for profit) organizations rely on products or processes or programs to be successful in their business. For those that do, this seems to be an inverted way of pursuing excellence. People bring vision, passion and creativity to their work as evidenced in non-profit organizations. If the right people are hired, every organization will move towards excellence in achieving its vision and what it was mandated to do. Any organization can show results, but only this type of organization will thrive with excellence.

Stuff To Ponder: Is Too Much Money Being Left On The Table?

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Though I have written about dynamic pricing, I have generally been a little resistant to the idea of implementing that sort of pricing because I feel having a clear and simple pricing is part of an arts organization’s relationship with a community. Or rather, having a complicated one can be a barrier to attendance and also generate a negative association with the organization.

But I have been reading some things recently that make me wonder about that.

JCPenny’s attempt to sell everything at an everyday low price that reflects the value of the product has apparently backfired on them.

According to a piece on MSNBC’s website:

Consumers complain about this constantly. That’s the basis of the Red Tape Chronicles in fact. At its best, the maddening mixture of coupons, rebates, sales and fine print fees can feel like a game. At worst, it’s being cheated. You’d think shoppers would love a chance to buy from a store that doesn’t play these games, the way car buyers (allegedly) like shopping at no-haggle auto dealerships.

[…]

To oversimplify for a moment, here’s Penney’s problem. They told the world that retailers only offer their best prices during crazy sales, and Penney stores would no longer host them. Sensible consumers apparently took that information to heart and decided to simply wait for such sales at other stores. As an added benefit, Penney lowered consumers’ search costs, because they now knew they didn’t need to bother driving to a Penney’s store anymore.

[…]

Shrouding isn’t the only reason Penney’s pricing plan is flawed. The firm is also leaving a lot of money on the table by rejecting a phenomenon known as “price discrimination.” Some people have more money than time, and some have more time than money. Some shoppers don’t mind spending hours to save $20; others would gladly give a store $20 to escape quickly. Smart retailers get money from both. By killing couponing, Penney has eliminated its ability to satisfy price discriminators.

And as others have pointed out, markdowns serve the age-old retailing trick of “anchoring.” For some reason, even very smart consumers feel better paying $60 for something if you initially tell them it costs $100, and then reduce the price.

Right around the same time this article came out, Colleen Dilenschneider on the Know Your Own Bone blog wrote about why offering discounts through services like Groupon is a bad idea for non-profits. The two reasons she gave?

“1) Your community expects more discounts, 2) Perhaps more importantly, your community waits for discounts”

Since MSNBC pretty much confirms what Colleen claims, I started to wonder if maybe arts organizations are fools not to double the prices and then offer 50% off coupons through social media.

Yeah, I know it is cynical and believe me, I still don’t want to get into doing anything resembling this. But I do everyone a disservice if I don’t explore the option.

Are arts organizations being responsible if they leave money on the table by not recognizing some people will pay more for the privilege of getting the transaction over quickly? If you effectively charge what you perceive to be the true value of your product by doubling the price in order to take advantage of consumer inability to pass up a 50% off coupon, are you really cheating your audience? (In other words, intend to sell tickets at $25 by pricing them at $50 and then flooding the market with half off coupons.)

One thing of course, I need to point out is that price does not develop loyalty. You can not develop a relationship with your community if interactions with your organization are based on price. I stated that in the early days of this blog and as Dilenschneider notes this is true even in these days of social media:

“It is far better for your brand and bottom line to have 100 fans who share and interact with your content to create a meaningful relationship, than to have 1,000 fans who never share your message and liked you just for the discount.”

Dilenschneider also points to some data that there are diminishing returns from social media discounts. This may illustrate be where arts organizations and retailers differ. Retailers can offer myriad discounts annually and not suffer, but arts and cultural organizations offer a product valued entirely differently from that of retailers

But lets assume that the current discounting model doesn’t work well for non-profits because it is really designed for the needs of retailers and that a discount offered in an alternative manner might prove more effective. Should we be researching alternative discount structures in order to more effectively generate revenue given that the future of donations and grants looks precarious?

Questions like this get into the core philosophy about the organization’s existence. Is the purpose to preserve and perpetuate the organization so it can continue to do good work? Or was the focus on providing the art in an affordable manner and the inability to do so is a sign that the organization should transition toward closure?

Still More On Crowdfunding Start Up Arts Orgs

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If you have been reading my blog regularly over the last few months, you know I have been keeping an eye on the possibility of the crowd funding elements of the recently passed JOBS Act replacing non profit status as a viable method of creating and sustaining an arts organization.

If you haven’t been reading that long, well harken back to my original musings on the subject as well as some more recent musings with links to information on the implications of the law as passed.

Hat tip to Charity Lawyer Blog’s Ellis Carter (whom I have previously incorrectly identified as male. Sorry about that Ellis) for her link to a piece on Startup Company Law Blog about the problems with the law.

Author Joe Wallin confirms many of the general suspicions I had about the costs of compliance probably being overly burdensome given the $1 million limit.

One thing that surprised me was that the law actually prohibits start ups from the “do it yourself” approach which I have always assumed to be a hallmark of start ups.

3) The Law Forces Companies To Use Intermediaries

The law forces startups to use intermediaries to raise the funds. This is fundamentally different from what typically happens with startups. Most startups raise funds without the help of intermediaries. In fact, this is the prevailing norm for startup companies. The typical advice to a startup is–don’t use an intermediary! Founders, do it yourself!

 But here the law forces companies into the arms of either registered broker-dealers or registered funding portals. These entities are subject to numerous requirements, and their compliance with those requirements will make the process much more difficult and costly for companies.

Maybe arts organizations with their bare bones mentality about providing a product might make it work within the restriction, but the whole point of pursuing an alternative to the non profit business model is to adopt an alternative approach and mindset about providing cultural experiences. (a.k.a. ramen isn’t a default food group for artists.) Though it will probably bring it own attendant problems, success might be measured by how diversely arts and cultural organizations manifest after phasing away from non-profit status.

At the end of his post, Wallin suggests Congress go back and make some changes to the law to allow start ups to proliferate more easily. I am sure there is still plenty of opportunity for successful crowd funded start ups within the law. If it isn’t changed before that, perhaps the successes will lend credence to the idea this can be a viable path for entrepreneurs, moreso with a few changes.

What Would Happen To Wine If Everyone Wanted Free Grape Juice

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Hat tip to Adam Thurman for distributing the link to an interesting piece about devaluing artistic content by Todd Henry. Henry wonders about the fate of artists when increasingly the view seems to be that content should be free.

“This means that artists have to shift their business models to give away (or make available for cheap) their main art, and instead focus on selling scarce peripherals. Authors sell lectures. No longer able to make a living from recording, bands sell tickets to concerts and survive off of merchandise sales. Content creators give away their content in order to gain eyeballs and ears,…

The problem is…some people are just great at being artists. They aren’t great at business models, distribution or line extensions. They just want to make great, valuable art and sell it at a fair price. What do these people do?
[…]

Would we have had The Beatles if they’d been told, “Never mind spending years in the studio crafting your records. Those things are just promotional fodder to sell these snazzy Sgt. Pepper t-shirts and posters. You should focus instead on how you’re going to monetize.”

I am currently exploring bringing a show, which heretofore has only existed on YouTube, to our stage. The creative team is actually excited that they might not have to cover most of their expenses out of pocket for once.

Until Todd Henry pointed out that increasingly it is ancillary products rather than the artistic product supporting the creation, it never occurred to me what a bizarre situation it is. These guys from the YouTube show I am talking to mentioned the same thing–T shirt sales helped defray some of their expenses.

But there are a million stories in the naked cit.. -erm, YouTube and not everyone is going to be paid for them. We already know that places like YouTube are eroding the concept that you should have to pay for content. People will clearly continue to create content and try to support it however they can. I don’t think an effort to inspire a shift in attitude is going to gain much traction.

Though who knows, I hear Comcast cable is trying to get people used to the idea of paying for bandwidth consumption. As much as I am resistant to the idea, it could change attitudes about paying for content as well.

To extend the question Todd asks about killing the golden goose, I wonder how many creatives will persist until their abilities mature if few are willing to pay for the content. That might be the real long term threat.

The guys I am trying to present are young and their show is fun. But what happens in a few years when they settle down and look to raise a family and they decide they don’t have time to create content alongside their regular job and family? The fact artists have never been paid well has always been a problem, but if even the possibility of a pittance wanes then unremunerated recognition becomes the only motivator to create.

Artists and other creative types need time to allow their skills to develop. Ira Glass said as much in the speech I linked to last week. As a country, we need creatives to mature into their abilities rather than quit early on.

Bringing Creative Balance To Business (And Vice Versa)

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There was an interesting piece in Fast Company a couple weeks ago that seems to bolster the idea that creativity is an important component of business success. University of Toronto’s Rotman School of Management held a design challenge “To help TD Bank foster lifelong customer relationships with students and recent graduates while encouraging healthy financial behaviors.” They invited participants from other MBA and design programs from across North America.

According to the article’s author and competition judge Melissa Quinn,

Both this year and last–the two years that Rotman invited other schools to participate–business school students were slaughtered by the design school students. Of the 12 Rotman teams this year, not one of them made the final round. And while only seven of the 23 competing teams were from design schools (including California College of Arts, Ontario College of Art and Design, and the University of Cincinnati), design teams scooped the top three places in the competition, doing significantly better than their MBA counterparts. So what does this tell us?

It might tell us that MBAs significantly underestimate the skill and expertise a designer brings to the table.

Later in the article Quinn notes that where the design school teams fell short was in providing a sense of the economic value of their plans,

I should point out that only the winning team from the Institute of Design at IIT actually charged a fee for the service they developed (a fact that was not overlooked by my final-round co-judge Ray Chun, the senior vice president of retail banking at TD). Some competitors were able to offer a vague notion that their ideas would generally create economic value, but crisp articulations of a profit model and underlying assumptions were hard to come by.

In talking about how both MBA and MFA training programs need to change, Quinn expressed the idea we in the arts all love to hate: artists need to focus on being more business minded. But you know, when you are pitching an idea to a bank, highlighting economic benefits are pretty much de rigueur.

What really caught my eye in the article was Quinn’s mention that the design school teams’ approach was effective in convincing “a skeptical panel of experienced professionals about a new idea that doesn’t exist in the world today.” When I read that, I had the sudden realization that creative types aren’t going to necessarily do well in a business environment as part of the structure which keeps things running effectively. The value of the creatives would be in bringing those new ideas for products and services to the fore and getting people engaged.

As Quinn mentions, in order to effectively convince people of the value of these ideas, creative types are going to have to possess enough business knowledge to be able to explain how it might be monetized. When I have read about how important creatives will be to businesses in the future, I have mainly thought about how they might influence the culture to be more nimble and responsive, bolster team building and cultivate creative practices.

This is all true, of course. But even more the value will be in, as Steve Jobs has said, creating products and services for which consumers can’t necessarily express a desire.

The process Quinn says the design school teams used was:

“…they shared real user insights to engage us emotionally, used narrative and stories to compel us, drew sketches and visualizations to inspire us, and simplified the complex to focus us. It’s proof positive that numbers and bullet points, while important, aren’t necessarily what drive executive decision making. “

Some commenters to the article, which included members of the MBA school teams suggest that the differences in the presentations were not as clearcut as Quinn depicts them. I wanted to mention this because it appears from the article’s URL that it may have been retitled from “Need To Solve a Tough Business Problem Don’t Hire An MBA.” From the content of the piece, I don’t think that is anywhere near it’s message.

Regardless of who used the techniques, it appears the storytelling and visualizations approach was viewed as more effective at convincing the judges. I think this fact is generally recognized, but perhaps few think of employing it alongside bullet points and numbers. There definitely needs to be a balance between the two because storytelling can easily slip into attempting to use sentimentality to convince and you don’t want to base business decisions entirely on emotion.

I’m Not Dead Yet!

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Well, it seems you can’t keep a good theatre down. In the news today, the Studio Arena Theatre in Buffalo, NY will re-open after declaring bankruptcy in 2008. This case is similar to the situation at North Shore Music Theatre and Coconut Grove Playhouse I wrote about a couple years ago in that outside entities bought up the debt and physical plant with plans to implement a different business plan and structure than the previous organizations.

Unlike the North Shore Music Theatre and Coconut Grove Playhouse, the non-profit entity which took over the Studio Arena Theatre won’t be keeping the same name. Instead of producing plays as the former organization had, the new owners have plans to present and rent the space and have contracted Shea’s Performing Arts Center to provide management services.

Unfortunately, as reported last month, there have been some rough patches with the Coconut Grove Playhouse deal. But I don’t think that detracts from the fact that people in each of these communities recognized that value that these arts organizations had for them and sought to revive them. Each perceived a void that existed when the organizations closed and enough of an unmeet need to warrant restoration.

Yes, there are a number of arts organizations that close every year never to return, but there have also been some prominent resurrections like these. The Pasadena Playhouse declared bankruptcy in 2010, emerged from it 4 months later and had a $350,000 surplus after the 2010-11 season. (I hadn’t included them as an earlier example because they never closed and dissolved as an organization.) I think it may be too early to declare the arts a dying concern quite yet.

Part of me applauds the prudence of groups like the one that is reopening the Studio Arena for heading in a new direction instead of attempting to replicate the past. Still, even though one of the complaints about the old Studio Arena was that it didn’t employ many local actors, it is a shame that Buffalo has fewer professional acting companies. Granted, the stories about the revival indicate that they looking to book shows with two week runs interspersed with university productions and one night engagements so perhaps there is an opportunity for acting companies to produce. Overall, I think the range of programming envisioned for the space will be beneficial for the community.

On a related note, I was wondering if non-profits being engaged to run the facilities of other non-profits is an emerging trend. Admittedly, it may be commonplace and I have simply been unaware of it until recently. Feel free to correct me.

One of my former employers, Appel Farm Arts and Music Center, was recently asked to take over the management of the nearby Landis Theater by that theater’s board.

I was proud of my friends at Appel Farm for having their expertise recognized. If this is an emerging trend, then I will be doubly proud of them for being on the leading edge of it.

In case I actually have to explain the title of this post:

More Thoughts On Organizational Structures

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When I was applying to graduate programs in arts administration, the head of the program I eventually joined said something to the effect of I shouldn’t enter the program if I was a frustrated actor. I wasn’t.

Just in case, you know, you hadn’t already gotten the sense that I really like the arts administration field after blogging on the topic for eight years.

I have always been a little unsure where I should fall on the subject of how devoted to arts administration one should be. I agree with those who say that we lack well trained arts administrators and think that more people should devote themselves to its pursuit.

On the other hand, I have recently been writing about the arts and culture sector adopting new business and organizational models. I think of necessity some of that will include fewer distinctions between administration and performers.

Yes, people can fulfill both functions. I have occasionally talked about how I have been involved in providing the initial artistic vision and leadership on some projects. But once you reach the point of trying to deliver a certain level of excellence, something is going to suffer unless responsibilities are delegated.

At that point, even if you continue to perform many of the functions of your dual roles, some portion of the responsibility has to be delegated to at least one single person who is solely dedicated to one role or the other. Dispersing responsibility and decision making across many people will only work to a certain point before it becomes unwieldy.

I am not saying organizations which have these sorts of structures can’t be successful. At a certain point it becomes clear that specialization is required. That said, recently it has appeared that large arts organizations may not be the best structure for the future. Perhaps as we move forward, some of the most successful structures will be of a smaller size and be quite effective with all members contributing to both the creative and administrative life of the group.

One thing I haven’t really talked about is the situation of the frustrated artist my grad school adviser referenced. I have worked with people who were competent at the administrative side of things, but were clearly more interested in their art. They were essentially doing the administrative thing to support their artistic pursuits.

It certainly isn’t a new story. Inevitably the artistic desire won out and they moved on in the hopes of sating it. As much as I would like to live in an ideal world where everyone has an opportunity to support their dreams, I have to tell you, the organization was not as well served by these people as those who were fully invested in the job they were hired to do.

The difference in the quality of work between those with a split focus and those who preceded and followed them was marked. Arts organizations have enough challenges and deserve better than “what I really want to do is direct,” though that is often what they choose to settle for.

It occurs to me that one of the benefits of the current structure for arts organizations is that when you apply for a position, the expectations are pretty standard from job to job. Even if the duties differ, you generally know what roles you will be expected to fulfill based on the job description. If arts organizations develop new structures that include artists who also handle administrative duties, then the expectations would be particular to that group.

In light of this, it would almost be better to form the organization with the intent to dissolve after a certain period rather than with an indeterminate end. When the group forms, a certain dynamic will develop that everyone acknowledges and at least tacitly approves. If everyone knows that one person is more inclined to the administrative duties and another is more inclined to avoid them, when the first person leaves it might be difficult to find someone who shares the same exact view on how their duties should be split and doesn’t become resentful that the other person isn’t pulling their weight.

Better that the organization dissolves and reforms to tackle the next project in a manner that plays to the strengths of the existing members rather than to continually attempt to shoehorn new people into the group with the expectation that the founding dynamics remain preserved.

In contrast to the aforementioned current structure, in arts organizations with a more flexible approach to their structure and position descriptions, the frustrated artist may not feel that they need to leave to pursue their artistic expression. Less concrete expectations in a job description may allow greater latitude for how employees/members contribute to the company. With the understanding that there will be an opportunity to express themselves, there may not be a sense of a divided focus. But again, it is all going to hinge on the dynamics of the company.

Invest In The Arts – Ministry of Culture Edition

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Some time ago I came across the China Cultural Industries cultural projects page. The page is part of the China International Cultural Industries Fair website, an organization authorized by the China Ministry of Culture “as a state-level authoritative portal website of China cultural industries, integrates the comprehensive information of the cultural industries, the release and trade of the cultural projects and products.”

If you look at the project listings asking for millions and billions of RMB in investment and are a little wary in light of all the corruption stories we are hearing from China these days, you probably should be.

I created an account to get a closer look at the “View after signing in.” categories of information and it didn’t really illuminate things for me. Information was incomplete or missing, website links didn’t work. From what I could tell, all the information is supplied by the projects themselves. There may not be any vetting to assure their viability. Though some do have official government sanction.

Now all that being said, there isn’t any comparable listing in the U.S. As much as we may want to keep away from solely arguing about the economic value of the arts, having a listing of all the arts and culture related projects in the United States would help illustrate the impact pretty visibly and make arts and culture harder to dismiss.

True, there are lot of arts and culture projects listed on Kickstarter, but no publicly available list that attempts to be comprehensive. Certainly no central list of projects with the imprimatur of a government arts and cultural office at any level. (Okay, I admit there may be some state or county that has such a list and I am merely unaware of it.)

Apropos of my posting last week about art organizations experimenting with different structures and corporate expiration, such a listing would help the process along by making a greater number of people more aware of ways to organize themselves.

It might also attract investment of resources and expertise from much further afield than would otherwise be possible. People might contact the project organizers noting that the it might be better organized under an entirely different structure and provide advice on some aspects of the planning.

Having this type of exposure would require organizers to have a higher level of sophistication than might normally be required. There will be those who might be looking to exploit a project solely for their own gain. In the for-profit world, many companies who receive the support of venture capitalists find themselves so dominated and beholden to the VCs, they barely recognize the company as their own after awhile. Something similar might happen to the cultural organization, the majority of which may no longer be non-profits.

Now that President Obama has signed the JOBS Act which will allow crowdfunding on a larger scale, this situation becomes more viable. (See my discussion of the proposed legislation last December. Good series of articles on the general implications of the JOBS Act as passed for crowdfunding on William Carleton’s site.)

Thanks to this sort of legislation regarding investment opportunities, people would be able to follow up on the project listings with a higher degree of confidence in their legitimacy. There will always be the danger of being scammed. A game being funded on Kickstarter was just outed as a hoax today thanks to the fact checking of some of the claims by the online community.

But as I said, in general, such a listing would be invaluable to the arts and culture community in terms of raising awareness of the scope and impact of the sector’s activities and marshaling support for them.

What’s The Expiration Date On That Arts Organization?

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A couple weeks ago Grant Makers in the Arts posted a piece by Rebecca Novick, Please Don’t Start A Theater Company. I had been thinking about the article for some time now when I saw a similar piece by David J. McGraw, The Epoch Model: An Arts Organization with an Expiration Date. Epoch Model… was published back in 2010 in 20UNDER40: Re-inventing the Arts and Arts Education for the 21st Century.

I was going to devote part of this entry discussing the similarities between the two, until I realized Rebecca Novick’s piece also was published in 20UNDER40 back in 2010 and is not appearing for the first time this year.

What McGraw suggests in Epoch Model.. is that arts organizations should form for a seven year life span and goes on to make some interesting arguments about the benefits of doing so.

It really isn’t a new one. I have recently been reading up about Lloyds of London which has technically reconstituted itself every single year since 1774. That may not be the most apt comparison to what McGraw suggests, but Lloyds originally insured sea voyages which many times were funded by groups that came together to invest solely in a voyage or trading venture and then dissolved thereafter.

Both Novick and McGraw provide examples of groups that realized their usefulness was over and willingly dissolved and suggest that people looking to form new arts organization integrate an expiration date or expiration conditions into the very formation of the organization.

McGraw suggests the following benefit to this approach:

•A single founding vision can guide the organization from start to predetermined finish.

•Productions, exhibitions, and initiatives can be selected to follow an artistic arc rather than merely filling generic programming slots year after year.

•The company can plan its organizational growth and contraction with an eye towards its end.

•Its membership can challenge itself to fulfill its mission with greater urgency, knowing that this collaboration is a fleeting opportunity with a defined commitment from each member.

•Audiences will know that they cannot take the organization for granted and that the organization represents a specific period of time, or epoch, of the artistic life of the community.

I was intrigued by the idea that the founding vision can be maintained because the founding board is more likely to stay committed knowing the project will only span seven years with a few additional years of commitment to tie up loose ends. (Recall that it is much better to stay on the board a sinking organization than to resign.)

I was also interested in his observation that:

“The Marketing Director has the most to gain from the Epoch Model. In addition to the novelty of creating brand awareness for such a unique company, every production will have a sense of urgency, as limited supply can increase demand. In fact, the organization may see cultural tourists from outside its region as news spreads of this relatively short collaboration of rising artists. Limited runs tend to draw more publicity and can pique the curiosity of even casual art-goers.”

He talks about the boon to real estate if the property owner in a bad market knows he can find a tenant who will occupy the property until things turn around, in the process possibly adding value to the neighborhood, as artists often do.

He also notes that an arts organization dissolving in their relative prime will actually contribute more to the community than an organization which has had to close because they were no longer financially viable. The former has a fair bit of property to pass on to various community entities, the property of the latter is generally liquidated for the sake of creditors.

Based on my reading of both articles idea of a transitory organization makes sense. We are discovering that the 501 (c) (3) model doesn’t really work for everyone. A temporary formation allows groups to essentially experiment with structures that work well for the participants and make sense for the particular community. It could be for a few months to accomplish a single project or it could be for a span of years. The board and the staff may be one in the same or they may be different entities.

I hate to invoke the image of viruses, but the short life cycles of the organizations could evolve a structure that is both effective and resistant to the travails of the social and economic forces of the time. Which of course means that continual evolution is required to meet the ever swifter shifts in social and economic forces.

There a few forces working against this sort of approach and they all involve money. As both authors note, the ever renewing arts organization idea is great when you are 20something, but once you want to settle down and get some stability, you aren’t going to want your arts organization to go gentle into the good night. Or you are going to start seeking work at conventional arts organizations. This might actually be a good thing. The infusion of people who have experimented with versatile approaches may keep the conventional organizations vital.

The other issue is that funders support a pretty narrow approach to the arts. There are certain characteristics they seek and performance measures they want to evaluate. If you have a history of success mounting a site specific dance piece in a warehouse and visual arts installation in a historic hotel but are looking to fund a theater piece in shipping containers on a barge, you may not meet any number of criteria related to being an established organization.

One thing that occurred to me as I was reading both pieces is that the people forming these organizations would have to invest the time to draw up agreements and keep good records of meetings discussion how resources will be allocated, etc. The benefit of existing corporate structures is that there are established laws which dictate the rights of board members, employees and customers.

It is easy to discount the importance of such arrangements when everyone knows the organization won’t endure. In the absence of a clear structure, people may not be paid what they are owed, conflicts may arise over ownership of assets and the board members may discover they are personally liable for the outcome of a lawsuit because no insulating structure exists.

In all, some interesting ideas are expressed in the articles, including the sobering concept emerging rather frequently that our organizations don’t necessarily have a right to continue to exist.

“But too many organizations confuse the need for art with the need for their particular company to exist. Despite emergency fundraising pleas, the death of an individual organization is not the death of an art form, nor will it deprive a community for very long.”

Dramaturgy Is Everyone’s Responsibility

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When I was studying theatre as an undergrad and grad student, there was one role in the theatre most of my fellow students never got a clear definition of, that of dramaturg. Most of our professors would wryly answer, “nobody really knows” when asked what a dramaturg did.

There was also a sense of guilt and embarrassment. Dramaturg was one of those positions you added when your theatre had money and seemed fated to be first cut when money got tight. Except the dramaturg tended to work closely with the artistic administration who were naturally resistant to the idea of cutting them so it was usually someone in development or marketing that got cut first.

If you look up dramaturgy on Wikipedia or the Literary Managers and Dramaturgs of the Americas (LMDA) website, you will learn that a dramaturg is a sort of historian/researcher who helps all those involved with a production, from the creative ensemble to the audience, understand the greater context in which a performance occurs.

The reason why no one knows what a dramaturg does is that the role is so generally defined, the duties can vary vastly from place to place.

I explain all this to provide context for the people I am about to quote. If you think that makes me something of a dramaturg, well Amrita Ramanan, the literary manager at Arena Stage would likely agree. She recently posted a manifesto outlining her vision of role of the literary office of the future on HowlRound.

“…David Dower…talked about dramaturgy as integral to a theater company’s thru line, such that every theater maker holds the mission and vision of the art as their ultimate goal even if they explore different tactics on how to achieve them. A marketing manager practices dramaturgy by communicating to an audience to mission and vision of the art through website blurbs, posters and brochures. A development associate practices dramaturgy when they approach a potential funder, carrying and articulating the mission and vision of the art and why it needs the funders support to thrive. A casting director practices dramaturgy when casting a show by supporting the mission and the vision of the playwright’s intent and director’s concept with every person they call in.

This is a variation on the theme I have often touched upon in my blog that marketing is everyone’s responsibility.

This is one of the reasons why dramaturgy is such a nebulous position at many organizations, if it exists at all. The argument can often be made that the dramaturg’s responsibilities are more suitably performed by a number of other departments in an organization. On the other hand, do the directors of marketing, development and the performance have the time to do all the appropriate research? Is having all these people researching the same subject independently the best way to assemble information? The answers depend on the ambitions of the organization.

Ultimately, whether an arts organization of any discipline has someone acting in the role of a dramaturg (whatever it may be called), everyone involved with the organization takes on some aspects of the dramaturg role in the execution of their duties. Each person needs to be skilled in acquiring the appropriate information and putting it into practice on behalf of the production.

Success in this regard will depend on talent and training, but also opportunity. Some of this opportunity will manifest as access to information sources, but as Howard Sherman recently pointed out on his blog, some of the opportunity can be provided and encouraged by organizational culture. (my emphasis)

“Most every theatre uses the first rehearsal/first reading as a day to introduce the company and the staff of a show, but in my experience, it’s incomplete. I recall being brought into rehearsal rooms, the staff circling the company, seated at tables, as one by one we did the Mouseketeer roll call of our names and titles. There might be a speech…maybe a quick demonstration of the set model – and then we were sent back to our desks to go about our regular business. We were not invited to stay for the first reading, often told that it would make the company too self conscious; I wish that we had been required to stay and listen, that even at the most unformed step, every staffer should be made to be there at the birth of a new production, not just drop by for a wave and a bagel before things got messy. The same should probably hold true for that final rehearsal in the rehearsal hall; it further engages the staff in the creative process, and refamiliarizes the company with a staff that they may not have interacted with for some three weeks. I have heard of some companies that even hold readings of plays long before first rehearsal, with the roles divvied up among the staff – what a marvelous way to connect the staff with what they’ll soon be working on, and to connect the staff with each other.”

I remember years ago reading an entry on Greg Sandow’s blog where he mentioned that those who worked for orchestras rarely attend the performances or come into the office the next morning and talk about the event. I was floored at the time. Given all the acrimony between the administration and musicians at many orchestras these past few years, it has become easier to believe.

Even if people at your organization come in and talk about productions with great enthusiasm, Howard Sherman’s observations show that there are always more opportunities to connect and learn about the projects that can be offered. Even if there isn’t a dramaturg at your organization, sharing the knowledge that individual staff members have collected in preparation for a project can help everyone do their jobs more effectively.

What Values Matter In Arts Grad Training Programs?

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This weekend Scott Walters quoted an extensive comment made on another blog about the value of MFA acting programs. The gist is, students are ill served by the programs which need to focus on training students for 21st century opportunities.

This struck a chord with me because I had recently read a Fast Company article about how UC Berkeley’s Business School started to screen applicants based on whether they embodied the school’s core values. The school had decided to embrace these values in the interests of creating a “reduction of overconfidence and self-focus, which are perceived to be excessively present among the business graduates and leaders of the top business schools.”

At the time I read it, I was idly wondering if arts training programs at the master level might do something similar to address any perceived (and real) problems with those they graduate. It had been a long time since I was in grad school so I didn’t feel I knew enough about the state of things write a post about it. Having read Walter’s recent post, I am no more certain than before since it is the view of a single unidentified commenter. I do feel fairly confident in assuming that, as with most things, there is room for improvement.

I will readily admit that given my ignorance of the state of things, I don’t have any concrete suggestions about they might be done differently. I will say that one thing that stood out in the Fast Company piece was that Berkeley-Haas instituted significant changes in their program based on their stated values and then required their applicants to adhere to them.

Most remarkably, they are not simply communication tools but drive operations from the curriculum, research priorities to staff programs, and faculty hiring. The curriculum, for example, has been extensively revamped in order to introduce elements of creativity, innovation, collaboration, ethics, and social responsibility.

They made sure they embodied the values before they required the students to do the same. It would have been much easier for them to decide to implement the change by altering their admission criteria and assuming that choosing the right students would result in producing the right graduates. But that is less likely if the infrastructure surrounding the students doesn’t emulate and reinforce the values the school wishes to cultivate in its graduates.

Successful realization of any goal is easier for any entity if all members are aligned toward attaining it. Probably the most powerful thing an arts training program can do to convince applicants that it can prepare them to ply their craft in the current environment is to point to a major realignment of priorities to that end.

As the commenter that Walters quotes, SayItLoud, notes, theatre training programs often cite successful graduates and places their students have worked or can intern at. As impressive as that is, the reality is the path those graduates took to success may no longer be viable.

What training programs may really need to do is say to applicants, “We’ve changed ourselves from top to bottom and what success requires now is to push you off the conventional path. This is not the place to pursue training in becoming a triple-threat, actor/singer/dancer. You may have become a video editor/painter/acrobat or a ecologist/architect/percussionist or all six plus four things we aren’t mentioning. Do your interests, values and practices align with ours?”

At the very least, it will get everyone thinking about the whole training process. Given that the current conversation is that arts organizations need to change the way they operate and interact with audiences, you aren’t leading students astray by telling them they need to obtain a wider spectrum of skills. Like as not, they will be the ones helping to drive the change with the types of works they develop.

Arts And The Four Year Career

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An article recently posted on the Fast Company website talks about how transitory people’s jobs, and increasingly, career paths, are.

“According to recent statistics, the median number of years a U.S. worker has been in his or her current job is just 4.4, down sharply since the 1970s…Statistically, the shortening of the job cycle has been driven by two factors. The first is a marked decline in the “long job”–that is, the traditional 20-year capstone to a career. Simultaneously, there’s been an increase in “churning”– workers well into their thirties who have been at their current job for less than a year. “For some reason I don’t understand, employers seem to value having long-term employees less than they used to,” says Henry Farber, an economist at Princeton”

Given the idea that arts organizations need to be more nimble in the current fast changing environment and that corporate CEOs value creativity in leadership, it made me wonder if arts organizations might not be able to take advantage of this trend by creating mutually beneficial employment situations.

Essentially, if there is going to be a lot of employment churn, the arts might be able to benefit in both the short and long term by making sure a jaunt in the arts is included in a person’s itinerant career path.

Arts organizations experience a fair bit of turn over in their employees. (In fact, I will bet that is what you thought the title of the entry referenced.) It may be worthwhile to hire people without backgrounds specifically in the arts into positions. Since you are probably just as likely to have to replace a person with arts background as someone who doesn’t, you aren’t overly wasting time and resources by hiring and training someone without industry experience.

The potential benefit to the arts organization is introducing some new ideas and practices to the organization. The employee gets a broader experience to add to their hodgepodge resume which may make them more marketable. (Needless to say, the work environment must be such that it accepts the former and confers the latter.)

Of course, as the article mentions, the trick is to separate those who are really driven in their pursuits from the dilettantes. Arts organizations in general aren’t particularly well skilled in those type of human resource practices. It would be worthwhile to have someone on the board with the ability to provide those services in some form, even if you have no intention of ever hiring a person without an arts background.

In the long term it could be helpful if businesses started to identify arts organizations as a good training ground for the skills they seek in employees to the point where it was as de rigueur on a resume as extra curricular activities are on a college application. It also wouldn’t hurt if the experience engendered an appreciation in the arts in the transitory employee that they will carry on to positions creating business or government policy.

Diversity vs. the Brand

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Apropos to the recent aggregation of articles on You’ve Cott Mail about diversity in the arts, I wanted to point back to a post I did a few years ago about the pressures of protecting the brand image which may make it difficult to achieve diversity.

In the post I point to how everyone from Ivy League universities to car companies will willingly eschew the opportunity for immediate gain in order to protect their brand image. Arts organizations may have the best intentions for diversifying audiences, but the fact that funders/donors/sponsors may desire to have their name before the eyes of certain demographics will drive many choices that are made.

Give The Gift Of Autonomy For Christmas

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So the big tragedy of non profit arts organizations is that while we are the champions of creativity, we don’t really provide all our employees the most conducive environments for being creative. Sometimes good things happen despite us. Because the workload to personnel ratio is usually slanted in favor of the work load, there often isn’t a lot of opportunity for people to stand back and do some creative problem solving that might result in the alleviation of some of the work load.

A recent post on the Drucker Exchange criticized the industrial age view that long hours and great effort equates to productivity when that simply is not so any more. Andrew Fuqua recently made a related post on the benefit of “slack” in the work place. His post was generally about the computer programming industry, but there were many lessons non-profit arts organizations can take away.

One of the things he says a programming company should do is, “managers must stop assigning tasks.” Instead, it is up to teams to decide how the work will be done. Of course, for non-profit arts organizations, this assumes there are enough people to comprise a team rather than 1 person (or half person departments). But essentially he says, managers shouldn’t be making assignments, handing out work or be an individual contributor.

“Well, gosh, then what should a manager do? Well, I’ll tell ya! You could manage more people. You can still step in when the team needs help (but not too quickly). You are still an agent of the company, handling legal stuff, signing off on expenditures, etc. You can still manage risks, especially if you are a skilled Project Manager.”

Even if that doesn’t sound like something that is viable given the size of your organization, there are other things he suggest that are definitely applicable.

“Keep an eye on the system, looking for improvements
Ensure cross-training is happening (not by making assignments, but making the team handle it)
Understand the dynamics of the organization
Understand how value is created
Protect the team from interference
Make the organization effective; learn to look at it as a system
Support the team
Clear roadblocks
Watch interpersonal interaction — watch when one team member pulls back, withdraws in a brainstorm (for example)
Help the team learn TDD by making room for them to learn (time – remove the schedule pressure while they learn)
Understand the capacity of the team (also a team and scrummaster job)
Think through policies, procedures and reward/review systems and improve them (what messages do they send?)
Understand what motivates knowledge workers (see the previous reference to Pink) and let creating that kind of environment be an imperative”

Arts organizations can definitely benefit from looking at the dynamics of the organization and looking at themselves as a system of interrelated and interdependent parts rather than different segments performing different functions. This approach will help the organization understand where the value they possess lies. It may not only be the stuff you are selling tickets to, but in the expertise that is possessed by the group.

You will see a lot of these factors mentioned as valuable in management texts. The one suggestion Fuqua makes that jumped out at me was in regard to watching when a team member pulls back and withdraws in a brain storm. That can say a lot about the interpersonal dynamics of the organization. It may be viewed as one less person providing opposition to your ideas, but it could be damaging to the organization long term to have someone feel disassociated from the rest of the organization or team.

You might note that Fuqua references Daniel Pink and his talk about what motivates knowledge workers. That motivation is autonomy which repeated studies have shown is more effective than cash rewards.

One of the things Pink talks about is a Australian software company, Atlassian, which periodically gives their employees 24 hours to work on whatever they want. The only proviso being that they share it with the entire company at a party they throw at the end of that period. Apparently the practice has contributed to the solving of a number of problems and the creation of new products.

Imagine what might be produced if you let a bunch of creative arts people loose of their everyday constraints for 24 hours with the promise of beer at the end!

One of the things I know is very important to a lot of people I work with in the arts is professional development opportunities. Again, this is something Fuqua references. Often the biggest thing inhibiting arts people from getting the professional development is the funding. One solution to this problem goes back to my comment a few paragraphs ago about understanding that the value possessed by the organization may not solely reside in the product you are selling to the public.

Your organization may possess expertise that is valuable to other arts organizations and for profit businesses. You might arrange for a cooperative professional development day where all the arts organizations get together and have their staffs provide learning opportunities for each other. You might be able to likewise trade your expertise to area businesses in exchange for training or advice.

Best of all scenarios–your organization (or cooperative of arts organizations) puts together training programs to sell to businesses based on your expertise. Perhaps seminars in team building, creative brain storming, or the selection and lighting of visual art in commercial office spaces.

Info You Can Use: Crowdfunding Legislation Update

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Thanks to Ken Davenport’s post on the subject, I discovered the bill to facilitate crowdfunding I wrote about at the end of October is nearing approval. The House (H.R. 2930) approved the measure early in November and the Senate’s proposed bill (S. 179) is in committee.

As discussed in my earlier post on the subject, the existing rules for inhibit small investments made by many people because S.E.C. rules kick in after threshold of 500 people. These bills provide a little more leeway.

William Carleton has a good comparison of the passed version of H.R. 2930 and the proposed S. 179. Of most immediate concern to most people will probably be that where the House bill places the per investor, per year limit at the lesser of $10,000 or 10% of annual income, the Senate bill caps investment at $1,000. The North American Securities Administrators Association apparently agrees with the Senate on this point.

At that level, and given the level of required reporting and investor notice, I wonder if it will be worth it to too many people to attempt crowd funding in this manner. But again, I am thinking in terms of the investing prospectus one receives. Presumably, there will be less information to provide to investors in the case of crowdfunding efforts.

Trent Dykes at The Venture Alley provides the details of the House bill. I was particularly interested to see what sort of protections an investor had against fraud.

Not that it isn’t enough motivation to defraud, but you can only raise $1 million annually using the exemption provided by the bill ($2 million if you provide audited financial statements.) In addition to providing warnings of risks to potential investors and sending a collection of information and reporting to the S.E.C., one protection people will have is that the money will be held in escrow by a third party until 60% of the target amount has been raised. Presumably, if the amount has not be raised by the target deadline, additional arrangements must be made to retain it. There are also provisions that ensure the people handling the offering and cash management are qualified to some degree. People with a history as a “bad actor” as determined by the S.E.C. will be prohibited from offering investment opportunities.

As I am not an expert in investing law, I don’t know how vulnerable these arrangements are to fraud. Presumably, moreso then your typical investment opportunity. Individuals will just have less of their personal fortunes exposed to the fraud.

For some people in the arts, this might offer a viable alternative to the non-profit model. I imagine the return on investment might manifest as a hybrid of traditional donor benefits and cash. Providing preferential treatment to encourage people to remain emotionally invested in the organization in addition to paying out cash dividends will probably help keep them financially invested in the company.

Hopefully the limitation on the investing level will insulate arts companies from demands to operate themselves to maximize investor return. Even if the cap is set at $10,000, people aren’t going to be getting immense returns enriching their bank accounts (at least not for a few years). Who knows, perhaps a company will realize so much success thanks to this, they will grow to the point the will be subject to regular S.E.C. investment rules.

Now that this form of investment looks to pass the hurdle of legislation, how long before the arts community will pass the mental hurdle of considering anyone who uses it to finance their operations as selling out their purity and ideals?

Info You Can Use: So You Think You Want To Merge

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It seems discussion of non-profit mergers is becoming more prevalent of late. I recently became aware of a research document created by Wilder Research and MAP for Non Profits looking at what factors contribute to or inhibit the successful merger of non profits in the pre-merger, merger and post-merger phases.

There were actually some parts of the document, What do we know about nonprofit mergers? Findings from a literature review, focus group, and key informant interviews, that were very familiar. So much so I thought perhaps I had already written a blog post on it already. It doesn’t seem that is the case. However, since their report includes a literature review in addition to surveying they conducted themselves, it is likely I read some of this before.

They raise some good questions and provide some interesting advice on many aspects of a merger on issues like the name of the new organization, getting a third party involved to shepherd the process, doing due diligence on each other, issues about conflicting organizational cultures, creating a clear time line for the process.

One suggestion they had was to involve your top five funders in the process in order to gain their investment. That may be very sound advice as at least one case they mentioned found that most funders treated the merged organization with its newly expanded capacity as if it were one of the constituent entities effectively cutting their support in half.

Many organizations chose to merge as a result of some sort of crisis, either the loss of leadership, financial problems, change in the operating environment, etc. According to the research, one of the worst times/reasons to merge is if one organization is at the brink of financial ruin. Other than the fact that the new organization will inherit the problems of the troubled organization and that it is not prudent to negotiate anything from a position of weakness, research shows that even mergers between relatively sound organizations don’t necessarily result in a financially stronger combined organization.

The following are areas that they identify as needing to be addressed during the merger phase. There is a similar list for the pre- and post- phases.

2A. Key stakeholder involvement
2A1. Executive staff champion
2A2. Board commitment to the merger process
2A3. Client, consumer, and funder involvement in planning

2B. Role of staff in merger process
2B1. Staff involvement in planning
2B2. Communications with staff throughout process
2B3. Staff’s perception of the effect of the merger

2C. Integrating formal and informal structures
2C1. Attention to cultural integration
2C2. Attention to board and mission integration

2D. Providing due diligence to the process
2D1. Clear decision making process
2D2. Clear and realistic time frame

They provided the following factors which contribute to a merger’s failure:

-Lack of capacity, sophistication, or skill in the board or executive leadership
-Leadership’s inability to communicate well or to effectively influence others
-A weak or declining balance sheet or imminent financial collapse of one organization
-Programs or services that are not particularly unique or of distinctive value to the community
-Organization’s fear of losing autonomy or change
-Differences in governance, culture, or mission
-Board and staff opposition to the idea of merger
Engagement purely for survival, not from strength
-People involved do not see the real work involved in a merger
-Loss of key leader during the process

Crowdfunding Become Crowdinvesting?

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In the “stuff you aren’t supposed to do” theme of yesterday’s post, is a piece from Slate about legal restrictions on crowd funding.

While thousands of people can donate to your cause via sites like Kickstarter, SEC rules prevent those same people from investing in your company. If you figure people will donate to people in return for tshirts or other small thank you gifts/services, there is probably a fair bit of potential in getting people to invest in the same project with the possibility of financial return. But the rules say no way.

“Under current law, that is often illegal. A longtime Securities and Exchange Commission rule, designed to protect unsophisticated investors, limits the number of stakeholders certain private companies can have. If you hit 500, you often have to go public. That means opening your books to additional scrutiny and your business to the whims of the market. And being public is just not a feasible option for a tiny business looking for start-up funding. Thus, an artist can receive thousands of $5 donations on a site like Kickstarter, but an incorporated farmer cannot accept investments from thousands of interested small-timers.”

These are some of the same rules that govern investing in Broadway shows and are meant to prevent people from losing large amounts of money because they were not entirely aware of the risks of investing. There is certainly some wisdom in having them.

There are some moves to change this situation. President Obama included such a revision in his American Jobs Act. Even though the act failed to pass, the basic idea has bi-partisan support and some law makers are asking the SEC to change the rules. One petition to the SEC asks for an exemption for investments made in $100 increments as a way to prevent people from losing their life savings. Given that the exemption would mean less oversight of the activities, there is good potential for unscrupulous operators to take the money and run.

Laura Horton at the Legality website has a post that discusses all the legal issues and the efforts to change the rules at length. She reports that the legislation being introduced in Congress, (as opposed to the petition for a rule change to the SEC), would allow a business to raise “$5 million in capital, with a limit on individual investments of the lesser of $10,000 or ten percent of an individual investor’s income.” Horton notes that these companies would be exempt from some of the usual reporting. Hopefully at $10,000 a person, they wouldn’t be exempt from as much as a company getting funded $100 at a time.

Crowd funding at these levels could open the doors for a lot of possibilities, including starting an arts related business. This model might provide a viable alternative to the non-profit structure. It could provide the tools to not only to get an organization started, but also to sustain it over time.

As for how fraud will be prevented, Horton says,

“those in favor of crowdfunding find that investor protection rests on a fundamental aspect of this financing, opening it to lots of people for investment. This “crowd” aspect creates transparency, which may temper the effects of deregulation. There is also a stronger sense of community support through this style of investing. Crowdfunding makes venture capital accessible to small-scale business owners.”

I have to confess some skepticism about this approach being viable in the long run. A crowd can provide good oversight in a small geographic community or when it is performed by investing clubs who meet to research and decide who to fund. My suspicion is that if this type of investment is going to reach any sort of scale, people are going to be doing it over the internet and will rely on Amazon.com type reviews to make their decisions. Presumably, the rating mechanism will be a little more rigorous and have better protections against those who might try to game the system than most online rating websites. It is still likely the system will still be vulnerable to some degree of subversion.

But who knows, it may create a burgeoning industry of companies who meet those soliciting funding and perform objective evaluations and audits. They could post all their findings online accompanied by video interviews, photos of operations, etc for investors to use in their deliberations.

Info You Can Use: Commerciality Doctrine (What The Heck Is That?)

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Hat tip to Non-Profit Law blog for providing the link to Charity Lawyer Ellis Carter’s 2009 post about the Commerciality Doctrine. As you can probably tell from the title of this entry, I wasn’t really aware of this doctrine at all, but it is actually very important in terms of an organization’s 501 (c) (3) status.

According to Ellis,

Commerciality Doctrine has evolved in the courts and is applied to determine whether an organization complies with Section 501(c)(3)’s requirement to operate exclusively for exempt purposes. A key factor indicating an organization is operating in an excessively commercial manner is that its activities are in competition with those of for-profit commercial entities.

Reading what criteria the courts use as a test for whether a non-profit organization is operating in an excessively commercial manner, I start to get a little nervous:

-pricing to maximize profits;

-generation and accumulation of unreasonable reserves;

-use of commercial promotional methods, such as advertising;

-sales and marketing to the general public;

-high volume of sales;

-the organization uses paid professional staff rather than volunteer labor;

-the organization discontinues money losing programs; and

-the organization does not receive significant charitable contributions.

Most organizations probably don’t have to worry about accumulation of unreasonable reserves and seating capacity may limit high volume of sales. If arts organizations start to adopt dynamic pricing for shows, they may have to watch how high they push prices. But a lot of non profit arts organizations have professional staffs who have replaced volunteers somewhere in their history. Even those without professional staffs use advertising, sales, marketing and discontinue money losing programs. How do you not flirt with violating your status under this criteria?

So is it actually good to keep those money losing programs around? Apparently so…

Factors evidencing the absence of a commercial purpose include the following:

-lack of competition with for-profit entities;

-below market rate pricing;

-relatively insubstantial reserves;

-lack of commercial advertising practices;

-the absence of sales to the general public;

-low volume of sales;

-use of volunteers and low-paid non-professional staff; and

-significant charitable contributions.

This list almost makes a virtue of incompetence and lack of ambition.

But the first thing I thought of after reading this list was, what about the Roundabout Theatre? How the heck have they avoided being shut down on this basis. Except for requiring as significant charitable contributions as anyone else, they are a non-profit that essentially fails on every one of these measures.

They actually may have run afoul these laws and I am just unaware of it. Plenty of commercial Broadway producers have expressed criticism about the way the Roundabout and other non-profits like Lincoln Center enjoy a competitive advantage over them. Back in 2000, long before he became chair of the NEA, Rocco Landesman wrote,

“increasingly the template of success comes from the commercial arena, which is, in the end, not dedicated to the art so much as to the audience. The uber-model for this trend is ”the American Airlines Roundabout Theater,” whose artistic director, Todd Haimes, saved a bankrupt institution by adapting contemporary, market-savvy, the-audience-is-king techniques of modern corporations. Pleasing the customers, giving them what they want in the form they expect, works for Coca-Cola –…It would, I suppose, be hyperbolic to say that Todd Haimes has had a more pernicious influence on English-speaking theater than anyone since Oliver Cromwell (and it wouldn’t be nice, either, since Mr. Haimes is a personable and honorable man)”

Now it should be noted that Landesman’s piece expressed regret that the non-profit theater movement toward a commercial orientation due to market forces has meant that little original work is created any more. Though he has “accused Haimes of running a wolfish commercial operation in the sheepskin of a publicly funded institution.”

The idea that decision making in non-profits shouldn’t be motivated by a need to compete with commercial entities is probably part of the basis for the criteria of the Commerciality doctrine. Although Carter provides an example of it, I wonder how often and strictly the Commerciality Doctrine is applied to non-profits. With cuts to arts funding at all levels and an oft repeated litany that performances should be self supporting or not occur at all, is it fair to require that non-profits ignore the pressure to support themselves with strategies that create more earned revenue?

Todd Haimes has said as much,

“I feel enormous pressure to generate income for our theater,’…`I’ll do anything within reason, as long as it goes back into the nonprofit purpose of the Roundabout,” Haimes said. “So I’m trying to be more creative.”

With a $40 million budget in 2008, $12 million in donated and needing $13 million in sales, most of us are not anywhere near Roundabout Theatre’s ability to raise scowls from commercial competitors. We do face similar pressure to perform well and might well find our ambitions causing problems for our tax status given that so many other aspects of non-profit operations are being examined.

Are We Being Nudged Toward Partnerships

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I have started to wonder if there is going to be an increased emphasis on partnerships and perhaps even mergers in the non-profit arts. I often read about mergers by non-profits outside of the arts. Although the presenters consortium upon whose board I sit is in the middle of conducting a merger with a sister organization, I don’t hear about arts organizations doing it that often.

However, the Mid-Atlantic Arts Foundation has recently announced a new granting program, Southern Exposure, which will support the presentation of artists from Central and South America. (By the way, you don’t have to be located in the Mid-Atlantic States to apply.)

Most of the program isn’t outside of what you might expect of such a program except that it will “support projects that are developed collaboratively by presenter consortia based in the United States and its territories and ensure that engagements take place in at least three different cities or towns.”

The Western State Arts Federation (WESTAF) used to have a similar program termed “hub grants” as part of its TourWest grant program up until a few years ago. From what I have heard (which may not be accurate) they discontinued it because of lack of wide spread participation. (We actually participated in a couple years.) But now that times are financially a little tighter, will arts organizations on a national level be more amenable to partnering?

But really, back to my original question of whether a trend might be developing in which organizations are encouraged to partner. One cause of my speculation is that this summer I saw a grant program sponsored by the National Endowment for the Humanities for community colleges that required recipients to involve up to 12 other campuses.

Looking at the Mid-Atlantic Arts Foundation website, there are signs that they might be going in the direction of encouraging arts organizations to partner more often.

“Over the last five years, MAAF has built a core of program initiatives designed to address specific issues of regional arts support. The work of the Foundation has been focused on:
[…]
-Developing an infrastructure for touring and presenting
-Making connections beyond the region
-Developing partnerships
-Strengthening existing networks
[…]
-Exploring sub-regional initiatives and collaborations with subsets of MAAF state members
[…]
“

Now granted, the Southern Exposure initiative might have just fit their pre-existing efforts. Given that it does fit into their plans, if Southern Exposure proves successful, they may start to encourage similar collaborations more often.

Hawaii has an active presenting consortia (as do our brethren in the 49th, Alaska) so we are thrilled because this program plays to our strength. Plus, there is a project involving a group from South America we have been kicking around for a couple years. I will be the first to admit, this sort of cooperation isn’t easy to arrange and manage. It helps to have a little incentive. It would be great to see other groups adopt this practice. (Especially if you want to bring me out to consult with you! 😉 )

Info You Can Use: Expertise As Entertainment

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So much to do and so little time to do it! I am a little short on time for my post today but I wanted to direct attention to Eric Ziegenhagen’s TEDxMichiganAve talk, Expertise as Entertainment.

There have only been 74 views so I know you all haven’t seen it yet!

What Ziegenhagen talks about is the increasing prevalence of expertise being valued as an attraction. He focuses a lot on restaurants. It is no longer dinner and a show, dinner is the show. With the increased appreciation of culinary skills of chefs thanks to myriad television shows, people are valuing exposure to that skill as an attraction.

Restaurants in turn are designing the dining experience in response to this interest by providing information about the different components of the meal and providing more opportunities to watch the preparation process.

Ziegenhagen speaks of one restaurant that sells tickets to their seatings essentially intending them to be scalped. They apparently researched the laws governing resale of tickets and designed their reservation process in a way that permitted them to be transferred.

Ziegenhagen references the burgeoning TED lecture franchise as a evidence that people are beginning to value what is basically the pre-show lecture/post show talk back as much, if not more, than the actual show itself.

Looking at them in that context and taking a look at what makes the TED talks so engaging and interesting may provide some insight into how to make pre and post show talks more valuable to your audiences. (Clue: It might mean bringing in someone with no association to your organization at all.)

Better ROI Than Thou

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The Los Angeles Times has a video of the change over process between the LA Opera productions of Cosi fan Tutte and Eugene Onegin.

My first reaction was how cool the magic of theatre is that such transformations can take place in a short time to generate the illusion of two different places.

Then I started to think about the cost and whether it was all sustainable. They only repeat the same production once so this change over requiring 45 stage hands happens about 4 times a week- Onegin on Saturday, Cosi on Sunday, Cosi on Wednesday, Onegin on Thursday, Cosi on Saturday, Onegin on Sunday. Then I look at the design elements and wonder if they really need to have 800 gallons of water on stage for one act only to drain it and expose the Plexiglas for the second act.

Next I looked at the prices, $270 for orchestra down to $40 for an unobstructed view in the back of the balcony ($20 for an obstructed view). If they cut back on some of the design elements and changed the production schedule, they could charge less and be more accessible, right?

But you know, while I was thinking all this, I was also feeling a little torn. I felt like my grandmother who, having grown up during the Depression, would scowl at us for not washing aluminum foil and Ziploc bags so they could be used again. Was the only reason I was having critical thoughts like this because that is how those of we in the non-profit arts are brought up to think?

Opera is all about spectacle and that is what people expect from the experience. People complain about the high cost of rock concerts and Broadway shows, but there are few people arguing they have to lower the prices to make the shows more accessible. Usually the accessibility argument for rock concerts is about keeping companies from buying up huge blocks of tickets, not that the original price was too much. People complained that the Broadway previews of Spiderman were so expensive, but people kept buying and buying.

So if the demand is there, what business is it of mine whether the LA Opera is operating in a way that requires them to charge so much? The rotating schedule might actually make better financial sense for them after all. I worked at a theatre in a community with a high tourist rate where the rotating repertory schedule actually helped increase their audiences.

Yet, while it does have significant private support, Broadway shows and rock concerts don’t depend on public support the way non-profits like the LA Opera does. So the question is, do we in the arts mount bold productions that employ technology cleverly to bring our audiences delight. Or do we worry that people wanting to reduce the funding the arts receive will use groups like the LA Opera as an example of why the arts don’t need funding since they can afford to operate at such high standards.

Some of this fear comes from the hostile reception the idea of public funding for the arts receives. It is also reinforced by the practice of private funding sources. The big measure of not for profit effectiveness right now is low overhead. I can’t recall where, but I recently read a quote from an influential politician/business person who said if anything could be funded, it should be the arts because they generate such a great return on the investment.

While I am glad to hear this message repeated by people not working in the arts, the pressure to have low overhead and great results for the investment tends to create a mindset where an organization views themselves as more virtuous than a better funded one because they bring the arts to under served populations and children on a shoe string budget. Who needs hostile politicians when we are all too willing to cast a “better-ROI-than-thou” disapproving eye on each other?

That’s all well and good, but this attitude is what also contributes to few people taking an arts career seriously because no one gets well paid.

Is In-n-Out Burger more virtuous than Wendy’s because they have a smaller, leaner operation? Sure, for profits and non profits have different reasons for operating, but few people praise a commercial enterprise as being virtuous because their cost controls have kept them small.

So does it matter how much the LA Opera is spending?

Info You Can Use: Dynamic Pricing That Doesn’t Alienate

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Last week I was reading about some interesting ticketing structures being used by theatre groups in Chicago. Theatre Wit offers what is described as a Netflix subscription model where they provide unlimited admission to their shows for a monthly fee of $36. They also employ dynamic pricing with their single ticket sales and increase the cost based on demand.

What really intrigued me was the model being used by Filament Theatre Ensemble. Instead of selling tickets, they ask people to sponsor an element of the production as the price of their admission.

“In lieu of tickets, customers can sponsor costumes, props, and set pieces, finance two hours of rehearsal space, or pay for the production’s licensing fees. Big-ticket items such as the rent for the performance venue are broken into small portions and spread over the entire run of the show, so that all of items on the website are priced between 10 and 35 dollars. “

What I really loved about this system is that there is dynamic pricing by default but it is presented in a very positive and constructive way. It also provides a degree of transparency about the costs of mounting a production to audiences and gets them invested.

“Seeing as there is a limited number of items available in each pricing category, dynamic pricing is built into the system: once all of the 10–15-dollar items have been sold, patrons have to purchase something in the 15–20-dollar range if they want to see the show. However, contrary to Filament’s expectations, the lowest priced items aren’t the ones that sell first. Patrons are willing to spend a few extra dollars to sponsor something they can identify with—a cool prop, or a distinctive costume—rather than paying a smaller amount that will go towards office supplies…

However, from the company’s perspective it is more important that sponsoring a particular item, instead of purchasing a ticket, increases the audience’s emotional connection with the performance and with the company. Ritchey recounts, “A lot of times people would come up to us after the show and say I got you guys an hour of rehearsal space or I got that costume.” People get excited about what they have contributed to the evening’s performance. In addition to that, viewing all of the elements that go into a production online gives the audience a sneak preview of the show. Having seen all of the costumes and props in advance, the audience immediately feels connected to the production when they recognize those items on stage.”

According to the article, there are still a few issues to work out. Specifically, arranging for admission of people who come to the door to “purchase tickets.” I am guessing given this unorthodox approach, it may be difficult to explain the remaining sponsorship opportunities to those who show up at 5 minutes to curtain and just want to get in rather than choose between a ream of paper and audition space.

I find stories about alternative approaches like these and the one Andrew McIntyre related about Toronto’s Passe Muraille’s Buzz Festival very encouraging. Slowly arts organizations are beginning to discover valid approaches to audience engagement and keeping themselves viable through experimentation.

Will Buffet Family Foundation Influence Other Funders?

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Non-Profit Quarterly linked to an interview in Fast Company in which Warren Buffet’s grandson talks about his approach to philanthropy as he takes up the reins of the family foundation.

As I read the interview, I vacillated between mild dread where I hoped no one else decided to adopt the approach and feeling that his approach was sensible and might provide leadership that would strengthen the general non-profit infrastructure in the United States.

What made me most uneasy was his focus on quantity over quality.

“The first question, for instance, is “Assuming we are successful, how many people would we reach directly with the funding of this gift?” Proposals gets 3 points for affecting +1 million people, 2 for greater than 100,000, and 1 for less than 100,000. Those proposals with a less ambitious scope can secure a coveted spot on the portfolio team by being particularly unique or cost-efficient.”

While he does allow for funding of smaller efficient and effective organizations, I just wonder if that will get lost in the desire to report numbers served and therefore reinforce the idea that you have fudge numbers and always report success or lose funding.

Where this is coming from for him is wanting to get away from non-profits making emotional appeals and move toward discussing the complex factors which contribute to the problems the non-profit is trying to address.

“In the philanthropic world, the problem is the product, in the business world, the product is the solution.” says Buffett, who argues that NGOs are forced to “sell suffering.” The needless focus on sappy narratives often overlooks sophisticated solutions that can’t be easily marketed with a T-shirt-clad celebrity holding a small child.”

This is where I feel he is most sensible because he is determined to fund every step in the chain to addressing a problem, including the unsexy areas. But to do that, he wants the redundant organizations to either get out of the business, partner with other groups or refocus themselves.

“…rather than dolling out cash to independent, uncoordinated actors with the most heart-string-tugging story, they could take on an entire social problems (like food security or breast cancer) by systematically lining up nonprofits to tackle each part of the causal chain, from federal policy to victim resources.

“If you are an NGO, doing the exact same thing as another NGO, and that other NGO is doing better than you’re doing it, then you are in business for the wrong reason,” Buffett says in an exasperated rant against the individualist nature of charities. Overlapping operations, he says, not only waste money through redundant overhead, but keep brilliant minds occupied with logistical distractions that sap their potential impact.

“We will give you money to execute your mission,” Buffett says, “if you work together and identify the most cost-effective and successful ways to achieve that.”

Meanwhile, looking at the entire causal chain of a crisis is key to revealing missing links in the solution, such as political or logistical hurdles that are essential to success, but not appealing enough to raise dollars.”

Granted, the focus of the foundation he is leading is on agriculture, water and feeding school children rather than arts and culture. However, the practices of a Buffet family foundation is bound to have widespread influence with funders in other areas. It is possible that other foundations may use the same criteria.

Given that the question about whether there are too many arts organizations in existence has been a hot topic of late, it is conceivable that funders are already thinking along these lines.

So let me ask-

-how many arts organizations would seriously discuss merging or refocusing if a major funder told them they were redunant and less effective than another organization?

-how many might consider abandoning major activities that were redundant if the funder offered major support to expand in their areas of strength?

-would the arts in your community be more vibrant if there were groups that focused specifically on different niches within the chain? Such as:

-organization that handed advocacy for the arts with local government
-organization that focused on advocacy for the arts in education in conjunction with other advocacy groups
-organizations that purely perform
-organization that coordinates outreaches to schools by designing programs that emphasize the strengths of the performance and presenting groups

There are more functions that different groups might handle, of course, but this serves as a good example. You might look at this and think about how difficult it would be with all these tasks so decentralized, but think about how more schools would benefit if there was an organization that was making an effort to provide uniform coverage of your entire city/county. How much easier would it be for artists to make a living in the community if there was an organization that was hiring them to do outreaches in schools or connecting artists with students seeking instruction.

All this in an environment made conducive for these activities by groups who solely focused on influencing law and policy in government and school boards. Their advocacy is made credible by the existence of organizations who attract and employ strong performers and other organizations who develop exemplary education/outreach programs and train the artists to execute them effectively.

This approach may decentralize efforts and require a lot of cooperation between different groups, but does improve on the current situation where everyone does a little of everything with different degrees of success provided they have the funding and personnel.  As Howard Buffet acknowledges, there is a lot of unsexy infrastructure that no one really wants to fund that is crucial to the success of non-profit efforts. What a boon it would be if someone would fund all those places at a level smart people would be willing to engage in the work.

Fund Making Long Term Investment In Performing Arts Orgs

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For a few years now people have been calling for foundations and other funders to provide more long term capital investment in non-profit organizations. The Social Velocity blog has an interview with Rebecca Thomas, Vice President of Strategy and Innovation at the Nonprofit Finance Fund. (NFF) (h/t National Endowment for the Arts) The NonProfit Finance Fund is in the fourth year of a decade long effort to provide $1 million of what they term change capital in each of 10 performing arts organizations they selected.

One thing Thomas talks about is how many non-profits are mis-captialized in that they have sufficient capital, but that most of it is in the form of restricted funds. She touches upon this in a separate publication, Case for Change Capital in the Arts and Financial Reporting Done Right, which I have briefly looked at and hope to blog on in the near future.

The thing that caught my eye was her discussion of how capital and revenue are reported on non-profit financial reports.

One of the things we learned early on in this work is that changing the financial reporting—to separate capital flows from recurring revenue—would not be an easy sell, for understandable reasons. Executive directors are reluctant to take a chance presenting new formats to donors who don’t understand the technique, and many board members aren’t inclined to re-learn nonprofit accounting principles. Moreover, NFF’s suggested methodology is not required by the Financial Accounting Standards Board, and auditors don’t always feel comfortable suggesting novel formats, even when they provide heightened clarity.

[…] suffice it to say that when capital and revenue are conflated, an organization’s reports do not present a realistic view of operating performance. Unintentionally misleading information can lead to poor planning and decision making by nonprofit leaders, boards and funders.

Longer term, it will take aggressive education and advocacy efforts to convince nonprofit executives, board members and funders of the value of producing transparent financial reports and audits that reveal business model economics separate from capital infusions. Nonprofits will need to be convinced that they won’t be penalized for producing statements that may, at times, show temporary weakness in operating results during a change or growth period.

Since NFF is in it for the long haul to help the 10 organizations in their pilot program institute substantial change, my guess is that they are trying to develop a way to effectively educate and communicate the validity of this different approach in financial reporting to boards and funders.

The first thing that came to mind when Thomas talks about mis-capitalization is how the Philadelphia Orchestra declared bankruptcy while possessing a substantial, but apparently restricted endowment. I couldn’t help but wonder if implementing the type of reporting discussed here would have made the real financial situation clearer earlier on.

I also wonder if they may not be the perfect candidate for using this reporting going forward. Even with the bankruptcy, they probably have the wherewithal to alter their accounting method where most arts organizations wouldn’t. Given their prominence, they could serve as an exemplar to non-profits, their boards and funders as to why these reporting methods should be adopted and properly understood.

One thing to note if you are hoping NFF’s pilot program becomes a trend, according to Thomas not all organizations are good candidates for change capital. They have to already possess strong management and self-evaluative processes which include data informed decision making.

Stuff To Ponder: Ticket Office Openness Vs. Security

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Currently I am involved in talking with architects to plan a renovation for our theatre. Part of this will involve razing and moving our ticket office. In the course of other theatre design projects with which I have been involved, as well as those related to me by colleagues, there seems to be a desire to have a more open and friendly ticket acquisition experience for audiences.

Since people are purchasing online and using credit cards to purchase tickets, the thought is that the reinforced bank teller window (an image recently invoked by Rocco Landesman) can give way to a more open concierge desk set up with an aperture to a secure backroom available for deposit of cash receipts.

Thinking this might be an option we should consider, I emailed the theatrical architect with whom the lead architect is working. The fact our ticket office is located outside rather than in our lobby adds a little twist to the concept. My concern was mostly with how to secure the desk area and keep it clean when we aren’t using it without resorting to bulky contraptions or unattractive steel roll up doors. Though sheltered from the rain, we would have to figure a way to avoid having money fly away in a breeze. I thought with some good design and procedures, we could overcome these hurdles and provide a more welcoming atmosphere for our patrons.

The problem is that while the move toward cash-less transactions enables us to move toward a more open and friendly experience, thieves are making corresponding changes in the tactics they use to exploit the new transaction formats. We may end up right back behind the reinforced teller windows again before too long.

With his permission, I am sharing part of the response I received from architect Paul Luntsford of PLA Designs.

“Due to the increasing problem with skimmers and RFID scanners, debit and credit card transactions are moving to the secure and controlled window. By the way, this skimmer/RFID scanner thing is really getting bad. We went to see Les Mis tour show last Friday at our huge, union run, city-owned 3000 seat theater. I used the ATM in the lobby to get some dough to buy junk during intermission. That night, or technically the next morning at 3AM, my debit card was used online at the Apple store to attempt a $1 test purchase by some unsavory character who had managed to compromise my RFID data from my card when I used the ATM in the lobby! So, you need to consider that all electronic transactions happen behind a window, and that window has an embedded wire mesh that is bonded to ground and acts like a Faraday shield to prevent capture of RFID data when the card is processed by one of YOUR people.”

While the credit card company may be at fault for not properly encrypting information, that fact will be of little comfort if people start to associate your brightly lit lobby with a dimly lit alleyway in a bad neighborhood where they may be preyed upon. As security of the cards improves, (and hopefully theft techniques lag), we can hopefully look to maintaining a more open transaction environment. If not, along with good cash handling procedures, you may end up having to train employees on safe credit card handling procedures like not passing the card back out side the Faraday cage without replacing it in a protective sleeve.

Info You Can Use: Variety of Thoughts On Dynamic Pricing

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It seems like dynamic pricing may start to creep into the non-profit performing arts sector as a common practice. Stories about it are starting to crop up more and more frequently. When the topic of changing prices based on market demand comes up, people often use the phrase “like the airlines do.”

So should I be surprised when today I saw a story about how Opera Australia got advice about dynamic pricing from the airline Qantas?

In the beginning of July, there was a story about dynamic pricing in the Los Angeles Times. Chad Bauman at the blog Arts Marketing did a good job addressing the recent move toward dynamic pricing in a post earlier this month.

Of course, who knows. Maybe dynamic pricing is just a hot story because newspapers see others during stories on dynamic pricing. Still, it is a conversation non profit organizations need to be having, if only to decide it isn’t for them.

I actually started a discussion on the Performing Arts Administrators’ group on LinkedIn back in May. I had some concerns about the approach to pricing suggested by a guy I was partnering with on a show. It ended up that I misunderstood what he was proposing.

There were only a few responses and the conversation appeared to have run its course when I went away on vacation at the beginning of June, but when I returned I found a slew of new responses. I think it reflects some of the concerns and thoughts people have about the practice.

One of the first responders, Mark Wladika, said the practice of variable pricing left him feeling manipulated, though allowed if people were aware from the outset that “hot shows will see an increase,” it might represent a middle ground. Another commenter, Omar Miller, noted that if the maximum variation was only going to be $5-$10, the potential revenue gains may not be worth the loss of good will if audiences felt manipulated. A concern for the good will of the community was echoed by a number of commenters.

As the conversation went on, the need to communicate the policy clearly seemed crucial as well as limiting it to single ticket purchasers and exempting subscribers. It was noted that lowering ticket prices at the last minute has the potential to alienate those who bought earlier at a higher price and end up reinforcing a procrastinating behavior.

Joanne Bernstein, a Chicago based arts consultant, advised that the decision to change a price be based on a rise in demand rather than proximity to a performance date. She argues that people are busy and should not be penalized for not being certain about their plans just because it happens to be less than 24 hours before a performance.

Maggie Christ brought up the legal issues surrounding variable pricing citing NYC laws that require if a range of prices is implied, the maximum price as well as the minimum price is required. For example, you can’t say tickets starting at $15 without noting that the top price is $500. Which, of course, gives a pretty good indication about the cost of most of the tickets and the probable location of those $15 seats.

Toronto based arts consultant, Linda Rogers, pointed out that some arts organizations are limited by the capacity of their ticketing systems. Airlines and many Broadway houses using services like Ticketmaster and Telecharge have a greater ability to alter their ticket structure in response to demand than most arts organizations. I have to agree there because the process we have to follow to charge a higher price on the day of the show is pretty clunky.

One comment I particularly liked came from Kara Larson, an arts consultant from Portland, ME.

“Two important points: 1) People value what we do differently. Correctly differentiating initial prices and dynamically raising them in response to demand allows people to decide for themselves what seats, timing, and price is right for them. The ones who want to wait for a sure-fire hit will often happily pay for the privilege. 2) Being responsible stewards of the organizations people charitably support means making the most of opportunities to earn revenue given our programming. Passing up opportunities to make revenue means asking for more donated support. And vice versa.”

In a later comment she made a pretty thought provoking suggestion about a different way to approach dynamic pricing:

“The base interest is understanding demand in our markets well enough to price ALL our tickets optimally. Building a rational projection model and adjusting it when we discover errors should be our first and most important task regarding pricing. Only when we err (significantly, in my opinion) do we need to correct by pricing dynamically. Dynamic pricing is an admission that we got the prices wrong in the first place, so badly that it’s worth it to the bottom line to invest in a new system for correcting them.

At the last arts center where I implemented dynamic pricing, the revenue increase was significant in the first season and less in the second. To me this was good news, because we had taken what we learned in year one and applied it to the base ticket pricing, so had less correcting to do at the last minute. Remember, whenever you price upward dynamically, you’ve already sold some (and often most) of your tickets at the wrong price.

I suggest that instead of spending what seems, industry-wide, to be an increasing amount of time debating the merits of dynamic pricing we all spend some time collectively developing much better predictive models for pricing in the first place.”

Some members of the group are moving forward with using dynamic pricing. Steve Carignan, Executive Director of the Gallagher Bluedorn at the University of Northern Iowa says he is moving forward with dynamic pricing this season. He asks,

“Performing arts has for a long time been linked to a discount mentality (devaluing our product and trying to cut our way to a smaller loss). Is it our customers who are uncomfortable or us?”

Liz Olson of the NYU Skirball Center for the Performing Arts made a comment that gave me cause for concern.

“…I don’t think that foundations or donors will look at variable ticket pricing fondly. They like when we are able to show self-sustainability but from what I have seen donors tend to punish non-profits they deem as operating “too much like a for profit.” (as seen in the endless debate about overhead costs and executive pay at nonprofits.)”

Does anyone have any insight into the validity of this? Have any foundations made comments of this general sort? Another commenter said she didn’t feel this was the view foundations and donors viewed attempts at dynamic pricing. However, neither offered much in the way of explicit evidence for either view. I hate to say that from what I have read, either could be the dominant perception at this time. Or perhaps the practice isn’t wide spread enough that foundations have developed a clear policy and approach.

It’s Yesterday Once More

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Tip of the hat to Don Hall (aka Angry White Guy in Chicago) for linking to the Everything Is A Remix web series, some thing of a labor of love by NY film maker Kirby Ferguson. Parts One and Two came out a while back. Part Three just came out a week ago. The last part is due out this fall.

As I have been thinking about intellectual property rights recently, the series struck a chord with me. As you might imagine, the premise of the series is that there are no original ideas. The first video makes that abundantly clear by examining music, especially that of Led Zeppelin, who didn’t make a lot of effort to change any elements of the songs they were appropriating and very little to credit the original artists either. The second video talks about movies like the Star Wars series and the Kill Bill movies and the influences they tapped.

In the third part, Ferguson starts to talk about how creativity and inspiration are based on the work of others, standing on the shoulders of giants, as Isaac Newton famously said in the 17th century. (Though Bernard of Chartres apparently referenced the metaphor in the 12th century.) His example that most startled me was noting that Xerox created a graphical interface computer with a mouse, desktop, pop up menus and other familiar features, Alto, in the 1970s. It was mostly used by Xerox and some universities and was never released for commercial use. Apple made improvements to the design and interface as well affordability and released the Lisa and Macintosh in the early 80s and that eventually morphed into the iPads people are running around with today.

There is actually a transcript and links to all the music and video Ferguson used for each video chapter, should one wish to purchase any of it.

One thing I appreciate about a lot of blogs and other online venues is that people often make an attempt to at least make a passing reference to the source of their information and the jumping off point for their posts. I feel a little bad for Xerox. Sure, they failed to really exploit the technology they developed for nearly a decade before Apple took off with the idea. Because of this their name gets lost in history if not for people like Ferguson. I am sure Apple probably would have faced a law suit if they had made a public nod in their direction.

Still, it is nice for people to acknowledge that they got their good ideas from you. The tracking data for this blog often shows people from universities reading for a long time. I often wonder if my ideas are making it into a paper–and if I am being credited. Or maybe someone just left their browser window minimized behind their chat window for a long time.

The discussion about intellectual property rights, etc is a pretty lengthy debate and even though I recently talked about the issue, I actually wanted to take another tack with this post and ask:

Are we in the arts standing on the shoulders of those who came before and moving ourselves to innovation?

Again, a subject of lengthy and long debate where the current thinking is probably leaning toward an answer in the negative.

But it strikes me that maybe things aren’t so bad as they seem. Or at least perhaps some of the steps that need to be taken may not be as intimidatingly far away as they seem. If, as Kirby Ferguson says, innovation doesn’t come mostly with a flash of divine insight but rather after an onerous road littered with failures and mistakes, then maybe it is just a matter of recognizing how the past is manifesting itself today. (Albeit probably requiring hard work and likely failures.)

I think I have mentioned before that when I was in grad school getting my MFA in Theatre Management, my class read Danny Newman’s Subscribe Now! was unworkable in current times when so much competed for people’s time and attention. He suggested having subscription parties where key people in the community would invite their friends over for tea and would help convince them to subscribe to your season.

Seems pretty difficult to replicate these days if you think about it in literal terms. But this is exactly what happens on different social media platforms and sites like Kickstarter. Key people in the community present your cause/organization to their friends and convince them to become involved. It is tougher to identify specific influential people than in the past when planning subscription parties. But for the same effort you invested in cultivating relationships with those people, you can disseminate information about your organization in a manner that convinces people to become interested and involved with your organization. They may not become as deeply invested as people did in the past, but you can potentially reach far more people than you did in the past.

I will grant that some innovation that moves past recasting the old in familiar terms will be required for the arts to successfully innovate for the future, but it doesn’t all have to be created nearly whole cloth from scratch.

(In the interests of correctly referencing things. The title of this blog is from a Carpenters song)

Joe Patti's Musings on practical solutions for Arts Management

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Butts In The Seats by Joe Patti is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
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