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Keep Your Eyes Open For NEA American Rescue Plan Grant Webinars

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While everyone is waiting for their Shuttered Venue Operating Grant (SVOG) application to be processed, you should be taking a look at the National Endowment for the Arts American Rescue Plan (ARP) funding. The NEA just held a webinar today about it, but most states and regional arts organizations are having one for their members. Americans for the Arts is having one on July 6.

In a nutshell, the reason why you want to apply for this is because there are far fewer restrictions than usual on the program. The only broad categories that they won’t fund are capital improvements and project grants. Usually all they fund are projects. They still don’t provide funding to individual artists.

They will pay for operational costs like salaries and non-capital equipment.  You can apply even if you have an SVOG grant pending or have received funding from other programs like PPP or EIDL.  You just can’t apply for reimbursement of the same expenses covered by another program. So if other funding covers salaries until December 31, you would need to apply salaries from January 1 onward to the ARP grant. The funding can be applied across two years which allows some time to regain momentum lost during Covid.

They have a PDF prepared with all the information you will be expected to provide. Note that everyone has the deadline of August 12, 2021 to submit a short form application on Grants.gov, but then organizations whose legal identity begins with A-L will apply through the separate NEA applicant portal August 19-25 and those with names beginning M-Z will apply August 27-September 2.

My guess is that they are trying to avoid a lot of the snafus which plagued the SVOG program.

Take a look at the information and find a webinar to attend. As you might imagine there is a ton of interest in these programs. I received an email about 2-3 hours before the webinar started that they had reached capacity with registrations and keep trying to get in if you are initially blocked so I queued up 20 minutes early in the hopes of being admitted.

A Grant Proposal Isn’t An Investment Pitch

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Last week Vu Le made a tweet that revealed a very troubling picture of corporations misunderstanding how non-profits operate and work that they do. This seems to be the “non-profits should be run like a business” taken to the extreme.

The goal of Morgan Stanley’s Children’s Mental Health grant program is to:

“…specifically addresses the lack of both private and public investment in children’s mental health and of effective ways to connect innovative ideas with capital.

The resulting systemic funding gap has only increased with the deepening crisis in children’s mental health due to COVID-19 and ongoing social injustice issues.”

That sounds like it is a mix of a venture capital opportunity and a grant program. They do specifically say they applicants can receive up to $100,000 in grants, but as Vu Le notes, they also have to spend six weeks working on their pitches:

Early October: Finalists announced; six-week program commences, during which finalists learn from industry experts, enhance their proposals and develop their pitches.

Which makes it sound like applicants will be judged on the slickness of presentation rather than on quality of their solutions.

I do think a lot of organizations suffer from not having access to a skilled grant writer and can benefit from help and coaching, but that isn’t a problem it takes six weeks to solve.

While the program acknowledges there is a “systemic funding gap,” since there is no guarantee of funding, the only groups that can afford to invest time in generating innovative approaches to mental health services and have staff attend six weeks of pitch coaching are those who are already well-resourced enough to absorb that cost. Those at the other end of the funding gap will have had to make a heroic superheroic effort and leap of faith just to submit to the first round.

I will say that despite all the focus on new, innovative ideas, I didn’t see anything that disqualified existing programs as Vu Le’s post suggests. There is a question about whether the program is a new pilot or an existing program, but immediately follows asking how it is innovative and transformative. Pretty much every other description of the ideas they are looking for indicates a bias toward brand new rather than under recognized and underfunded.

I could hold forth at length about all the problematic dynamics operating here, but want avoid having casual readers tune out and move on. A lot of the language from the commercial sector has been creeping into non-profits and this grant program is really replete with it. The fact there is so much money at stake is sure to influence the vocabulary used by non-profit organizations going forward.

A few months back I had tweeted about my discomfort with the use of “deliverables” in the non-profit because so much of the work done does not result in discrete commodities. I think it is even less appropriate to be applying that concept and attendant time lines to addressing mental health.

 

Your Tax Dollars At Art

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You may recall that back in 2010 the Detroit Institute of Arts (DIA) was permitted to put a property tax up for vote on an election ballot to ensure a source of financial support. In return for the property tax increase, which was $20 on a home valued at $200,000, residents of three counties around Detroit would be permitted various levels of access to DIA programming.

Hyperallergic has a follow up report of sorts from Salvador Salort-Pons, Director of the Detroit Institute of Arts, and Eugene Gargaro, Chairman of the Detroit Institute of Arts board of directors. Spoilers – In March 2020, residents of those three counties voted to extend the property tax rate to 2032.

The DIA advocated for this unorthodox approach because there were serious conversations in local government about selling off the institute’s artworks in order to generate sufficient financial support for the organization.

The Hyperallergic piece says DIA negotiated individually with each of the counties, but that generally they were providing the following services:

For each county, the DIA now offers free admission to all residents, free field trips with free bus transportation to all students, free weekly programs for seniors, including free transportation for groups, and a community partnership program where we work directly with non-profits in each county to jointly create programs and events that meet their communities’ specific needs, such as art-making experiences for veterans or those experiencing homelessness.

The article goes on to discuss DIA’s commitment to having the community set the agenda for what the museum should be:

Providing this level of service over an expansive geographic area is not easy, but the rewards extend well beyond the financial support we receive. By being accountable to the residents of our region, we have adapted our programs, exhibitions and even our operating structure to ensure we are giving our diverse communities what they want from their museum, not what we think they should have.

It is good that they state this commitment because a memory of recent criticisms of DIA came to mind as I was reading the article. A quick search and I found articles from March and April about accusations of Salort-Pons fostering a unhealthy work environment and engaging in some ethically questionable practices in regard to some artworks.

I also found a New York Times piece from August 2020 specifically asking if the DIA had lost touch with the predominantly Black residents of Detroit, citing a mixed record of decisions by Salort-Pons.

Given that Covid has allowed for a great deal of introspection and planning about how to move forward, it will be interesting to see if anything happens over the next 4-5 years to shift these perceptions.

The “You Didn’t Pay Enough Last Time” Approach To Fundraising

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Nod to Artsjournal.com for posting David Rohde’s examination of how viewing new ticket buyers as donors immediately after their attendance experience is extremely detrimental to arts organizations. He specifically addresses how the Metropolitan Opera’s use of telemarketing in this manner is leading to its demise, but they are not the first or last arts organization to employ this approach.

There have been others who have written about what it says when I person who has just seen a production for the first time gets a call or email asking for a donation or to become a subscriber a day or two later. However, I don’t recall anyone invoking quite this perspective:

From the patron standpoint, the problem here is three-fold. First, name another product or service that announces after it’s won a new customer that they underbilled you and you’re not welcome back until you fork over more dough for the first time.

He goes on to say that Metropolitan Opera ought to be playing up the benefits it has over its Broadway neighbors:

The Met’s goal with any new patron should have been to get them to tell five friends about how exciting it was to attend the opera and bring them all the next time….

The seating in the theater is more comfortable than in the typical Broadway theater, where the audience rows are often jammed up against each other. There’s no chance of missing the story in an opera because of the English titles on the seatbacks in front of you, compared to Broadway’s blasting of amplification that often seems disconnected from whoever’s singing or speaking on stage.

And the opera intermissions are longer and can be more of a party, especially at the upper balcony/bar level that inevitably attracts a fun crowd on La Bohème nights, compared to the rushed crush of bodies in a Broadway intermission that always ends in a mad scramble back to the seats for Act 2.

Rodhe’s overarching point is that relationship building is what will enable organizations to endure through the next crisis that may emerge and telemarketers just aren’t equipped to create those relationships.

Introspection and Funding Equity in NC

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Equity in funding decisions has become a hot topic of late.  Last week on the Americans for the Arts blog, Krista Terrell, Acting President for Arts & Science Council of Charlotte/Mecklenburg (ASC), the local arts agency for that North Carolina city and county, made a post discussing how an internal analysis of funding practices revealed just how lopsided distribution of funds had been in the period of 1991-2020. They found that

“…nine institutions each received more in operating support than all ALAANA (African, Latinx, Asian, Arab, Native American) organizations combined.”

Terrell admits that fighting the inertia of status quo to effect change is going to take a lot of effort. She observed that in 1992 ASC fired the majority of its all-white board drawn from a core group of affluent ZIP codes in an attempt to diversify representation only to have the board gradually revert to an all-white membership again.

Likewise, there is institutional resistance to ASC’s desire to implement more equitable funding practices.

One president of a legacy organization told me, “I’m all for changing inequities as it relates to access,” but when I asked their thoughts about changing inequities related to funding, I was met with a long pause. If ASC wants its funding to go further, I was told, it should invest more in legacy organizations with existing infrastructure instead of grassroots organizations.

This is “the lie” at work. Think about what was said through the lens of equity. Equity is about everyone having the resources they need to move along together.

Another legacy organization wrote a Letter to the Editor. Some asked why I did not include the work they are doing and why they could not have been readers of the report and provide feedback. I was accused of not being inclusive.

This is not happening in a vacuum. Earlier this month, I saw a piece in the Charlotte Observer which reported the city of Charlotte was proposing to revamp the way the arts were funded, creating a different funding agency/board. There are indications across a number of news stories that existing funding methods were no longer sustainable.

It is unclear to me whether any of this is in response to ASC’s self study and therefore an attempt to make the process more inclusive or a reaction against that attempt. While the city is promising more money for the arts, the article says artists in Charlotte are skeptical and demanding greater transparency, equity and accountability in arts funding practices.

Meanwhile, the county of Mecklenburg says they have no intention of getting involved in doing the work they feel the Arts & Science Council is doing so well.

Time To Review – To Whom Are You Accountable?

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During the Covid pandemic there has been a fair bit of introspection and soul searching about arts and culture, the role they should have in people’s lives, and the medium through which the experience should be delivered.

Now that there is some optimism about a transition to a relatively better operational environment for businesses and other organizations,  (Yes, i am indeed taking pains not to use terms like “return to normal”), it is definitely time to think about how those theories will be manifested.

Vu Le linked to an important essay by Hildy Gottlieb addressing the question of to whom non-profits should be accountable. Her primary thesis is that it is illogical to view the organization as accountable to funders & donors. She dissects the illogic of the implications of a funder accountable position. Among her best examples is the following:

If organizations are primarily accountable to donors, and a donor dies, is the organization still accountable to that person? What if it’s been 30 years since they died, and the world has changed dramatically — are you still accountable to that person’s wishes? Or are you accountable to their heirs? What if the heirs don’t care about your mission — perhaps their mother was an animal lover, and they could never understand that part of her. Maybe they even hate your organization. Are you accountable to the second and third generations of a donor who loved you, even if her heirs do not?

Gottlieb says the organizational mission determines to whom you are accountable. If your mission is serving a certain group, but they take a backseat to funders, then you are not fulfilling your mission. She addresses the concept of there being no mission to execute without the money with the following anecdote:

I once found myself in conversation with board members from a federally funded health center, who all listed patient health as their highest priority. However, one board member kept insisting, “We can only prioritize patient care to the extent we have the money to do so.”

So I took a sheet of paper and wrote “Values Statement’ at the top. Then I wrote, “Our primary focus will always be the health of our patients, as long as we have the money to do so.” I asked if that is what they would like to post in their lobby.

Suddenly their sense of accountability shifted.

She also notes that in the United States the organization has tax-exempt status in return for providing a public service. The reason for being and accountability is the public service and not the money. The “good stewardship” of funds that results in underpaid staff who turn over at a high rate doesn’t help the organization to advance it’s mission.

“Focusing their primary accountability on the money, we see board members spend a huge percentage of their time discussing financial matters, and often zero time discussing what success would look like in their community”

Gottlieb also debunks the sense that fundraising is a result of relationship building, the oft voice sentiment “people give to people, not organizations.” She says no one is fooled that the relationship is more than a transactional one:

Here is what “fundraising is about relationships” really tells a donor:

If you give us money, we will be your friend.
If we think you will give us money, we will court you as our friend.
The more money you give us, the more friendly we will be.
If you fail to give us money, we will eventually stop calling you.

If we truly valued donors as people, we would stop categorizing them as LYBUNTs and SYBUNTs.

So much of what she writes can easily be applied to the way arts and cultural organizations approach donors/members/volunteers. While I often say it is worthwhile to read an article, I strongly emphasize the importance of reading this one and thinking about how the opportunity for a fresh start will change the way your organization operates moving forward.

I was considering putting such an emphatic statement at the beginning of this post, but considered that anyone who read this far would be more prepared to make the effort toward this goal.

I strongly suspect being more steadfast in prioritizing mission over money will make accomplishing progress in areas of equity and inclusion suddenly much easier than it was before.

Cross-Discipline Pollination For Post-Covid Arts

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Following the link tweeted by Ava Wong Davies got me to a lengthy blog post by Tim X. Atack about things that need to change in theatre post-Covid.  I will initially engaged by his insistence that the arts needs to stop citing the economic value of the arts when arguing why they need to be supported. As long time readers know, I am very much in agreement with this sentiment.

…there’s a growing feeling that over a year later, the driving focus is to get back to business as it was before the pandemic – maybe, even, to take steps backwards.

That feeling’s compounded by hearing, over and over, industry leaders using the language of our oppressors as justification for business as usual. I’m so so tired of the assertion that The Arts need to be protected because ‘they give five pounds back for every pound put in,’ like some Gordon Gecko hokey cokey. It might be true, but the people we’re making this upward argument to simply Do. Not. Fucking. Care. There are easier ways to make profit, without the messy business of creating art that makes you think about things and feel stuff.

And worse, when the bottom line becomes the principle reason work is made, defaults rule. The idea of art being life-changing or surprising or transformative actually becomes a threat when the main thing you want to do is keep an existing base happy. Theatre stops being alive and becomes transactional. Experiences become about promises made in return for money, rather than invitations to be part of something new, or bigger. Even political plays stop being political and become ‘about the politics’ instead, worthy but inert, leading nowhere.

Atack also broaches a subject I have been less enthusiastic about as a post-Covid reality, the digitization of the live performance experience. He argues from the perspective of the need for cross-disciplinary competency which makes the necessity feel less objectionable to me. (Though even an introvert like myself thinks the spark of having a live interaction with another over a shared experience is irreplaceable.)

At the start of lockdown I heard one artistic director say their theatre was ‘not about to become a film production studio’. But in truth, those kind of skills and cross-disciplinary thinking were shown to be desperately needed the very second theatres started uploading what felt like 1 million appallingly made films…

[…]

… All told, we might not want our theatres to entirely become film studios. But if we don’t regularly allow film-makers, and artists of other disciplines, into our theatre culture on progressive and free-thinking terms, to cross-pollinate and diversify the form, if we don’t modernise our concept of a theatre career, when the next virus comes we might as well just shut up shop and walk away.

As I said, his entry is a good length has has many other thoughts about the dynamics of the arts industry post-Covid so it may be worth taking a read to see if anything he says stimulates some thoughts for you as well.

SVOG Program Updates Coming Fast Now

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While I am pretty sure people are following the developments of the Shuttered Venue Operators Grant program pretty closely and are probably getting regular updates from their state and industry service organizations, I figure it doesn’t hurt to put reminders and updates out there myself.

Especially since all the updates I have been getting from service organizations haven’t pointed out some important distinctions between the FAQs the Small Business Administration is putting out on a weekly basis now. (Likewise, assume I am not pointing out the distinctions that are important to you and read through them!)

For example, about a week or two ago they started posting check lists of materials you should be collecting in advance of the opening of the application period which appears to be on track to happen in early April. The latest version of the check list can be found here, but since they are updating between Thursdays-Sundays, if you are reading this after March 18 you are better off going to the main page.

The same goes with the regular FAQ document. The passage of the American Rescue Plan has caused sections of the FAQ to be removed in the March 12 version.

For example, the March 5 version had this question:

6.Can an entity apply for a PPP loan now and decide later on the loan if it did not receive an SVOG? At what stage is a PPP loan considered “received”?

but it is now replaced with:

6.*No longer relevant / deleted per the American Rescue Plan being signed into law.

Though if you scroll down, you will see a couple new points of information have been added to that section which address PPP loans and SVOG funding:

21.*How will receiving a PPP loan affect an eligible entity’s SVOG award?

22.*If a portion of my PPP loan was forgiven, will that affect how much of the loan amount is deducted from my SVOG?

As before, anything that has been updated since the last FAQ has an asterisk. But you should through everything thoroughly in case you missed an update.

Among the latest updates are answers to questions about whether the payout will be lump sum or multiple payments. Answer – it depends on a number of factors. See page 16

Should you use fiscal year 2019 or calendar year 2019? – You can use either, but if you apply for the supplemental funding phase you need to use the same time frame.

There was also a new entry answering questions about whether sponsorships should be counted as earned revenue since donations are not counted as such. The answer is different for commercial and non-profit performing arts entities:

Because it represents payment made in exchange for a service (i.e., recognition or advertising), sponsorship payments (such as naming rights) received by for-profit entities will be considered earned revenue. Like the treatment afforded memberships and fundraising events, sponsorship payments received by non-profits will be considered part earned revenue and part gross revenue. In such cases, the sponsorship payment amount a non-profit receives that represents a fair market value for services in exchange (i.e. promotion, free admission, use of facilities) will be deemed earned revenue and the portion of the sponsorship payment that exceeds that amount will be deemed a contribution and thus gross revenue…

Latest Shuttered Venue Grant FAQ Provides Increased Detail

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While I am sure a lot of performing arts venues have been closely paying attention to news about Shuttered Venue Operators Grant (SVOG) program designed to help arts organizations impacted by Covid shutdowns, you probably wouldn’t have expected a major update to a government department’s FAQ document to be rolled out on a Sunday.

There was a major update to the SVOG FAQ on Sunday.

It isn’t difficult to identify what information is new because anything that didn’t appear in the February 12 update has a * next to it.

This version answers a lot of questions I have heard asked in webinars, including specific information about the eligibility of performing arts venues run by university, state and local governments. Similarly, there is detailed information which apply to museums.

The February 28 version also provides new definitions for a lot of terms like museum, promoter, regular programming, theatrical producer, performing arts organization operator, cover charge, mixing equipment, lighting rig, sound engineer, etc.

The question of what constituted fixed seating came up a lot in webinars I attended because it is a significant requirement to receive funding in some instances. In this version they added the following information:

*Would heavy bleachers pushed back against the wall when not in use but never removed from a theater qualify as fixed seating?

Yes. Any cumbersome seating not easily or regularly removed from a theater will be considered fixed.

While there is a requirement that people be paid fairly in the legislation, earlier versions of the FAQ explained that volunteer labor did not exclude a venue from apply if the staff managing the venue were paid. This means that many community theatre organizations may also be eligible for SVOG funding.

The FAQ that illustrates this best is probably the following, which also appeared in earlier versions:

If a venue’s box office is staffed by volunteers is it eligible to apply? Yes. Among the criteria included in the live venue operator or promoter definition is a requirement that a qualifying venue must engage at least one individual to perform at least two of the following roles: sound engineer, booker, promoter, stage manager security personnel, and box office manager. The Economic Aid Act does not reference any hired box office staff other than a box office manager and does not absolutely require even that position. As such, the use of volunteers to staff a venue’s box office would not preclude it from being eligible to apply for an SVOG.

There is also some oddly specific questions that makes me think the legislation was intentionally written to provide eligibility to a corporate entity.

Does a live venue operator who qualifies as an “eligible person or entity” remain eligible for an SVOG if that live venue operator has a minority investor (less than 51% ownership) that has more than 500 employees, locations in 11 or more states, and locations in 2 or more countries? Is that the only ownership/control-related grounds for disqualifying someone?

Yes. The Economic Aid Act speaks only of majority ownership and control in the context of the disqualifying conditions related to being listed on a stock exchange or to the geographic scope of operations and number of employees. There are no other control requirements in the statute.

If you hadn’t researched SVOG funding or didn’t think you qualified, the latest version of the FAQ should provide a greater degree of clarity than any previous version. (Though the additional detail may dash the hopes generated by the previous vagueness.)

Applying For Save Our Stages Money, Keep Close Watch On The Site

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I am hoping that all of you who work at a performing arts venue in the United States are like me and have been getting seven or eight emails a week making you aware of a webinar on the Shuttered Venue Operators Grant program aka Save Our Stages funding.

While it is difficult to know exactly all the information you will need to assemble, you definitely want to make sure your organization is registered with SAM.gov. Any grant from the federal government, regardless of which department’s website/system you apply through will require this registration and it can take up to two weeks to get verified. Since the application windows are only two weeks long, based on the amount of your losses, you don’t want to be waiting for your registration to clear.

You will need to know your DUNS number as part of the registration on SAM.gov so applying for/researching it could be another step in the process.

While the date when the application window opens hasn’t been set (as of this writing), information on the Small Business Administration site is constantly being updated so you almost have to make checking the program page a daily ritual.

For instance, the FAQ update for the SVOG program which came out February 5 had some significant updates from the FAQ that went out nine days earlier on January 27.

In January, the information for Museums was:

Museum Operator
1. Is a museum partially funded with state dollars eligible to apply?
Yes. While there are specific eligibility rules for entities owned by state or local governments, the receipt of funding from a state government does not affect its eligibility.
2. Is a museum that received CARES Act funding eligible to apply?
Yes. Per the Economic Aid Act, receipt of CARES Act funding does not disqualify an entity for SVOGs.

In the February 5 version it reads:

Museum or Movie Theatre Operator
1. Is a museum or movie theatre with a multipurpose room with movable seating eligible to apply?
No. The Economic Aid Act specifically requires fixed seating for qualifying amphitheaters of museums and motion picture theatre operators and makes no allowance for temporary, removable, modular, convertible, or other non-fixed seating arrangements. As such, museums and motion picture theatre operators cannot satisfy this requirement with other forms of seating. NOTE: There is no fixed seating requirement for other types of eligible entities.
2. Is a museum or movie theatre with outdoor fixed seating eligible to apply?
Yes. The Economic Aid Act does not require qualifying venues to be indoors. If the venue meets the applicable eligibility requirements, it should be eligible to apply for an SVOG.
3. Is a museum partially funded with state dollars eligible to apply?
Yes. While there are specific eligibility rules for entities owned by state or local governments, the receipt of funding from a state government does not affect its eligibility.
4. Is a museum that received CARES Act funding eligible to apply?
Yes. Per the Economic Aid Act, receipt of CARES Act funding does not disqualify an entity for SVOGs.
5. Is a drive-in movie theatre without fixed seating eligible to apply?
No. Per the Economic Aid Act, a motion picture theatre operator must have at least one auditorium with a motion picture screen and fixed audience seating, so a drive-in movie theatre is not eligible to apply for an SVOG.”

Number 5 was an individual answer in the January version and got wrapped in with museums, but the other additions are new content. If you are thinking about applying for this program, keep an eye on the website so you can be as prepared as possible in advance of the application period.

Lack of Perks Don’t Make Or Break Donor Relations

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Advisory Board for the Arts just sent out a summary of four takeaways about what motivates arts donors based on interviews conducted this past November and December.. While this post is going to be quote heavy, it isn’t going to include all their observations so I encourage you to take 2-3 minutes to read the whole thing.

The first takeaway was basically  “first impressions set the tone for the whole relationship.” Once someone makes a donation, future donations will generally fall in the same area. The amount donated is fairly dependent on their perception of what a person like themselves has a duty to donate.

“…which is a combination of what they can afford to give and what they believe is their duty to give, based on factors like marital status, whether they have children, and how much they get out of the arts. When prompted to discuss whether he would consider increasing his giving to arts organizations, for example, one interviewee said that increasing “would probably be appropriate for a couple or a family. Just being single, $1,000 is already a high tier.”

The second takeaway probably holds no big surprises. Donors like to support different organizations, but they have a core group of entities (~2-5) with whom they concentrate their support and perhaps up to 20 others which they vary their support.

The third takeaway is very promising for organizations during and after Covid. While people may donate at a certain level to gain perks, taking away those perks won’t cause them to reduce their giving, by and large.

A handful of donors we spoke to pointed to benefits like free parking and access to donor lounges as reasons for their giving — but across the board, donors indicated that they would not change their giving habits if those perks were significantly reduced or removed entirely (as has been the case for many during the COVID-19 pandemic)… Many donors expressed a desire to help their communities, including by attracting business and building a vibrant local economy, through a demonstrated commitment to the arts. They stated their views clearly: the arts are not a luxury. They belong — they are needed — as part of the social fabric of every community…

The last takeaway is also probably not a surprise. Relationships and connections matter–both with the organization and other participants.

…the opportunity to meet and to know other people is what brings them back each year. Interviews revealed they have an acute awareness of what would be lost without those relationships.

Importantly, donors emphasized the difference between arts organizations’ (often costly) initiatives to foster community-building and the community itself. One interviewee summed this up succinctly when she told us that “perks like donor parties and receptions create community, and that is one of the satisfactions people get from donating. It is something people get besides the altruism of giving to the arts. But there are a lot of ways to create community without parties.”

We spoke to some donors who had met lifelong friends through the opera or symphony; we spoke to other donors who jumped at every opportunity to speak with artistic directors and performers and curators. They weren’t planning on discontinuing those relationships anytime soon. To do so would be to leave the community that had brought them those friends in the first place.

Decision Not To Grow≠Failure To Grow

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An article on Daily Yonder making an interesting point came across my social media feed last week.  They noted that part of the reason why rural communities are characterized as being in decline is that those communities that eventually grow much bigger are no longer classified as rural, they become a metro.   It is almost like claiming that the life expectancy of caterpillars is getting shorter despite the increase in available flora without acknowledging that the abundance of flora allows the caterpillars to transition into butterflies earlier.  This is a form of survivorship bias.

“Rural America is reported as declining in part because we no longer count as Rural those counties that grew into a Metro classification. We are measuring those counties that stay Rural which, by definition, have not grown,” stated the report.

[…]

Those that remained rural are far from homogenous, but the report stated that “they often have some economic specialization or dependence. Counties that stayed Rural and lost population tended to depend on farming, mining, or oil and gas. Counties that stayed Rural and gained population (though not enough to switch to Urban) tended to be recreation-dependent and/or retirement destinations.”

The way rural counties are classified and reclassified contributes to a skewed image of “struggling rural America.” Policy makers should consider this as they look for ways to help rural counties succeed.

This reminded me of the frequent complaint that the success of an organization or company is predominantly measured in growth. Is the number of people served or funds raised/earned greater than it was in the past? A lot of us know it is the less easily quantifiable depth and quality of the experience that can create deeper impact and lasting impressions in participants.

Heck, at about 4 pm this afternoon I got an email at my day job saying our outdoor fire escape concert series has been nominated for a special Covid Cultural Award. I would argue that a primary criteria for that was just “able to do something this year” rather than anything to do with growth.

I strongly suspect there is a dynamic at work in the non-profit sector as a whole, and the arts and cultural industry in particular, similar to the one observed in the Daily Yonder article. There are rural communities that see growth, but remain rural but there is often no differentiation between them and those rural communities that are doing poorly.

If you make a conscious choice to stay small or only grow large enough to provide sustainable salaries to staff and then reinvest resources into providing better and better experiences, you end up in the same category as groups that are just entering the field or entering your size classification.  As a result, the perception of your organization is shaped by sweeping generalizations about your category.

If others in your category are struggling to deliver quality programs or lack the capacity to do good work, then by default the belief is you are as well despite having developed an extremely stable foundation over the course of decades.

This dovetails with my frequent discussion of how economic impact is a bad yardstick by which to measure the value of the arts. Just as the authors of the study of rural communities say different measures and different solutions should be applied to rural communities, a single standard of success is not appropriate for all arts organizations.

 

It’s More Than Just Naming A Minster of Culture And Other Measures To Help Creative Industries

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To continue where I left off from yesterday’s post about the UNESCO document, Culture in crisis: Policy guide for a resilient creative sector, the next section addresses providing support for cultural and creative industries in the wake of the Covid epidemic. Whereas the policies covered in yesterday’s post were more targeted toward helping individual artists and organizations, this section is more focused on broader sectors. This part of the document has seven separate sections, but I don’t intend to take screenshots of them all.  Some of the proposals aren’t as relevant to non-profit arts organizations so I will summarize rather than going into detail.

The measures proposed in this section include: Accelerated payment of aid and subsidies; Temporary relief from regulatory obligations; compensation for business interruption losses; relief from taxes and social charges; stimulating demand; preferential loans; strengthening infrastructure and facilities.

Since I am writing from the bias of a U.S. based non-profit, some of these measures aren’t as significant as others.  Accelerated payment of aid is basically the suggestion to pay disbursements on grants already in place rather than waiting for final reports or the completion of services in order to allow organizations to remain liquid and finish all that stuff.

Relief from regulatory obligations as described in the document are focused on broadcast networks. I am not sure there are a lot of regulations in the U.S. that are inhibiting organizations from staying liquid and aren’t important for protecting workers and participants (i.e. those that deal with employment, health and safety, supervision of children in camps).

Similarly, relief from taxes doesn’t impact a lot of non-profit arts organizations. In some locations where the organization is making a voluntary payment to local government to support infrastructure, some discussion about payment is probably worthwhile. For those organizations that pay local/state sales tax, getting that removed in a time when tax receipts are way down is probably an extremely difficult conversation.

The preferential loans section is a valuable proposal, but the content of that section can be summarized as: The loans should be made, but the banking sector has insufficient understanding of the variations in creative organizations necessary to evaluate them for creditworthiness for loans so the banks need to be trained first.

Compensation for business interruption loss of course is a big issue, especially in terms of insurance paying claims. This section definitely is definitely worth reading since it is so relevant and balances the concerns of both government and industry.

Stimulating demand is a really interesting section and something folks in the U.S would love to see the government embrace. Look at that first line “The State is sending a clear message that the art and culture are essential services to which all citizens must have access.”

I appreciated the fact they noted change and results wouldn’t happen immediately and counseled a long term view.

I also think the observation that ministries of culture (or the NEA in the case of the US) does not have the expertise to stimulate demand is valuable to note. This is something extremely important to acknowledge when it comes to discussions about elevating arts & culture to Cabinet level position in the U.S. government. It isn’t enough to have someone in the position, the overall policy and practice of the government must be aligned toward cultivating both supply and demand. Even if the culture secretary/minister portfolio doesn’t have the ability to stimulate demand, government policy should be that those that do work hand-in-hand with the culture secretary/minister toward that end.

I debated whether to take a screenshot of the Infrastructure section because it states the well-known and easily summarized “Edifice Complex” truism. People like to fund impressive looking structures, but don’t want to fund the programs or people or programs that will inhabit the structures. However, I feel like we can all use the vindication:

Budgeting More Money For Culture, Despite Covid. You Can Probably Guess Where

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Last week Artnet reported that Germany’s 2021 draft budget held an increase in funding for cultural organizations in the country.

You may recall that I made a post in May that clarified German cultural organizations didn’t receive $54 billion in aid as had widely been reported.

German arts administrator Rainer Glaap had brought the misunderstanding to my attention and provided links to stories that explained that the money was spread across a wide swath of industries and that since each German state had their own programs and interpretations of how funding was to be used benefits to cultural entities varied wildly with freelance artists often receiving short shrift.

The most recent story seems to be more specifically focused on funding for cultural entities since the budget numbers cited are $2.26 billion and it quotes the German culture minister

Culture minister Monika Grütters says that such a strong budget for the final year before the German elections underscores the country’s commitment to culture, especially on top of its existing billion-dollar coronavirus rescue program.

“Especially in times of crisis, culture is the foundation of our social cohesion,” Grütters says in a statement. “Art, culture, and the media make us aware time and again of our great privilege to live in a country of freedom of the press, culture, and opinion, where controversial debates are possible, desired, and endurable. The protection of these freedoms remains the highest principle of federal cultural policy.”

The German government’s cultural budget has grown by about 60 percent since Grütters took office in 2013, and 85 percent since the German chancellor Angela Merkel came to power in 2005.

The story doesn’t really get into whether the different states were taking steps to make sure freelancers and small business groups were better able to access funding or other supports than previously.

 

While the erroneous $54 billion amount had caused no shortage of envy among arts and cultural professions last Spring,  I wanted to point out prioritizing culture is not an outlier. Not only has improving funding for cultural organizations been a priority this year, it has been a priority for over a decade. It should be noted, this budget has to be approved by the German Senate before it is put in effect.

What’s This Soft Landing Thing You Speak Of?

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This week Vu Le at the Nonprofit AF wrote a pretty thought provoking post about the way the left-leaning non-profit sector consumes, rather than supports, its leaders as more conservative focused groups do. Le had recently left his job when someone reached out to ask if he had a “soft landing.”

I got to understand what Angie meant by “soft landing.” This is what conservatives do for their leaders. They provide them with support to ensure that their work continues….They understand that their most effective leaders are their greatest weapon, so they do everything they can to protect and invest in them and their ideas.

The progressive side, meanwhile, treats people like batteries. Batteries are only as valuable when they have any juice left to power machines. As soon as they are empty, they are worthless and you toss them and you get fresh batteries. People burn out, they leave and are sometimes never heard from again, and we are OK with it, because we just find new people/batteries to replace them with…As Pia Infante of The Whitman Institute said, “The right invests in people and ideas; the left invests in projects and programs.”

Le goes on to enumerate how this manifests. It isn’t just that arrangements might be made for a conservative to get a book deal, a job with a think tank, or a seat on a company’s board of directors where a progressive won’t. He notes that if organizational leadership transitions, funders will take a wait and see attitude before continuing to support them as if the good work the organization had done was inseparable from the leader.

Le speaks of his own experience working with foundation program officers for decades and having them tell him an innovative idea he has to expand the impact of his organization work doesn’t align with the foundation priorities. He says if funders sincerely want to make the difference they profess they do, they need to at least trust those with whom they have a long relationship to execute what is needed.

He provides a good number of other examples that are worth reading and considering. He ends his post with a bright bit of hope. The woman who had contacted him about his soft landing came through with a grant that will support Vu Le during a time when his speaking engagements were cancelling.

“What’s the catch?” I asked Angie skeptically. Funders had reached out with encouraging words, but almost none had offered financial assistance. “Are there metrics, outcomes? Do I need to pay it back?” I asked. “No,” she said, “just keep writing or working on your sketch comedy show or whatever. Your voice is important, and for everyone who wants to see the nonprofit sector and its funders change, we need you.”

Alas, Germany Didn’t Allocate $54 Billion In Relief Funding To The Arts

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You may remember reading that Germany had rolled out €50 billion ($54 billion) in funding for the arts a few weeks back. The news was touted as putting arts funding in the US to shame. While it may ultimately still be the case that aid to arts will put the US to shame, the claim that all that money is going to the arts is not accurate.

I had received an email about some arts research from long time friend of the blog, Rainer Glapp, who lives in Bremen, Germany. I asked him how things were going with all that funding. He responded that there was a big misunderstanding about all the money being focused on the arts and culture.

He explained the money is intended for small businesses and freelancers. While artists can apply, the money is intended for rent of venues and other expenses and not for personal expenses. He told me that primarily, direct funding for arts comes from the 16 states rather than the federal government.

As I went back to find articles about the €50 billion I had seen, I discovered that pretty much every website references the same ArtsNet article. There is a correction to that article dated March 27 which reads:

The government has clarified a point of confusion in its press release and previous reports in the media, stating that the aid package for small businesses and freelancers in culture, art, and media will come from a larger package for solo self-employed people and small businesses that totals €50 billion.

So artists and arts organizations won’t be benefiting as well as first impressions had indicated.

Rainer graciously dug up some articles on the situation which are written in English. One on the Deutsche Welle website illuminates the problems artists are facing:

But on April 7, the Alliance of Freelance Arts, representing 18 branches, replied that freelance and solo artists and their small business teams had “hardly any” access to such federal measures.

“This is due on the one hand to the lack of federal guidelines on the recognition of work-related living expenses as business or employment expenditures and on the other hand to the fact that the [16 German] states tend to interpret administrative leeway to the disadvantage of freelance artists,” said the alliance.

[..]

Already, the German Music Council (Deutscher Musikrat/DMR) had demanded a monthly basic income grant of €1,000 ($1,088) for “all freelance creative professionals” over the next six months.

Another website Rainer shared provides a chronology of how the coronavirus impacted cultural activities in Germany. It reinforces the fact there is no federal relief funding focused on helping cultural entities and illustrates just how varied the support for artists is in each of the states.

However, there is no specific federal support programme designed to meet the specific needs of the cultural sector. This is still being demanded by the German Cultural Council (April 22), the Cultural Council of North Rhine-Westphalia (April 16) and other associations, in the form of a cultural infrastructure fund.

[…]

The possibility of claiming support services — in addition to the instruments at the federal level — is also very much dependent on the state the applicant lives in…. Baden-Württemberg have an emergency aid programme for freelancers that allow them to apply for EUR 1180 grant money for up to three months, Bavaria offers EUR 1,000 a month in basic payments, but only for members of the artists’ social fund. In Hamburg, self-employed can apply for EUR 2,500 in addition to federal funds. In Bremen, artists can apply for up to EUR 2,000 in emergency aid (in addition to a purchase programme for visual artists); in Saxony-Anhalt EUR 400; and in Mecklenburg Western Pomerania there are bridging grants for artists available in the amount of EUR 2,000. The support fund for artists supported in NRW (EUR 2,000 per month) was only equipped with a total of EUR 5 million, so that only a small proportion of the applicants could take advantage of this fund. Other federal states (e.g. Berlin and Saarland) had to discontinue their support programmes due to over expenditure. In other federal states there are — in addition to the federal programme — no state programmes, for example Brandenburg, Lower Saxony, Rhineland-Palatinate and Thuringia.

Might Be About Time To Get Back In The Fundraising Saddle

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If there has been any benefit from the Covid-19 shut down it is the sheer number of webinars being offered to help businesses and other non-profit organizations connect with resources. I am sure we would all have been happier if life hummed along as before rather than necessitating the need to agonize over what loan or grant programs our organizations might qualify for and trying to get applications processed.  However, it also feels like networks of information and resources are being constructed and strengthened through this all. Hopefully they will persist beyond this period of time and become an asset.

By my last estimate, I have participated in 10-12 sessions in the last two weeks. One I found particularly interesting that is generally applicable was the National Trust for Historic Preservation’s session on “Communicating and Fundraising for Preservation in a Time of Uncertainty.”  (slide deck) Since I run an historic theater, I thought there might be information on resources available for our facilities.

What I found helpful was their advice on fundraising during these difficult times. Basically, they opened by saying just like the many stages of grief, there is going to come a point in the way you are processing your current situation where you will start to focus on the future. Part of that will be getting back to fundraising.

They said you can approach donors now, but just for the purposes a check-in with them.  The conversation should focus on how they are doing and what they are hearing about how other non-profits are doing. This will give you a sense of their priorities at the moment. You are also maintaining relationships and laying the groundwork for the future.

In terms of when you can make an ask, you need basically be sensitive enough gauge when the time will be right. But when you do make the ask, the webinar presenters emphasize being worthy, not needy. You should make the case in terms of your worth rather than in terms of your desperation for funding. They also strongly advise against shifting your focus to chase the direction dollars are flowing at the moment.

Here is the relevant slides from the presentation.

The point about being accommodating is in respect to acknowledging priorities might not be focused on your causes at the moment. In terms of hosting events, they point out that this might be a good time to host a virtual meeting or information session. Those that are invested in your success want to hear how you are doing.

I should mention, today my staff and I had a consultation with Michael Kaiser from the DeVos Institute of Arts Management. You may remember he is the former president of the Kennedy Center who was hailed as a “turn around king.” He is offering free one hour consultations to arts organizations about how to cope in these times. (~380 and counting). He provided the same advice about focusing conversations with donors and funders on how they are doing.

He also made a similar suggestion about hosting a virtual meeting on Zoom or other platform. In our case, it would be to discuss our process in planning our upcoming season since our contracting and scheduling process is delayed, not to mention no one really knows when we will be able to assemble in large groups again. Based on the type of calls we have been getting, this type of meeting is likely to help strengthen our relationship with our audiences and assuage their concerns. We are waiting until all the refunds for cancelled shows have been processed so that topic doesn’t dominate the conversation.

Portland, OR Art Tax Update

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Back in 2012, Portland, OR approved a $35 tax to supports arts education and arts organizations around the city. In 2017 I wrote a post about how overhead was starting to cut into the amount of money available to distribute to programs. Part of that overhead was attributable to the fact people weren’t paying the tax and so funds had to be diverted toward enforcement.  Last week, via Artsjournal, is another article mentioning that the tax hasn’t proven to be the boon supporters hoped it would be. For one, people still are resistant to paying it.

The art museum, like the rest of the big five, never received the targeted 5 percent support.

That’s in part because the tax has never brought in the $12 million a year voters were told to expect. (Revenues were $9.8 million the first year and peaked at $11.46 million in 2016.)

Portlanders have been reluctant to pay it. Although the city’s population has risen nearly 12 percent since November 2012 and tax receipts should have increased proportionally, figures show revenues still never reached levels proponents forecasted.

A point I want to clarify. The article makes it sound like arts funding for schools has diverted money that was intended for non-profit arts organizations. However, from my earlier posts, it appears the law that was passed intended to fund the schools first and then the non-profits would receive funding. In fact, this recent article says when the measure was passed in 2012, funding the schools was politically more attractive to voters than funding non-profits. While the arts organizations had been pushing the art tax idea for a long time prior to the vote, when the time came, the resolution being voted upon was written to fund the school first.

The other thing the article notes is that between the collection effects and the art tax name, there are public relations and perception issues which have proven problematic.

While arts leaders all favor more Portlanders paying the tax, some worry the city’s zeal to collect is counterproductive. “You get pinged with a letter, you get pinged with a postcard, you get an email saying time to pay the arts tax,” says Portland Center Stage’s Fuhrman. “That’s where I think the bad PR comes in.”

Andrew Proctor, executive director of Literary Arts, which produces the Portland Book Festival, says the public’s ill feeling has a cost. “Even the name ‘arts tax’ sounds punitive,” he says, “and it misleads citizens that in paying the tax they have supported arts institutions. They haven’t. It can damage our fundraising efforts and can polarize the conversation.”

[…]

Hawthorne, the former RACC official, says he fears the public may believe the tax works. “Ten to 12 million is a lot of money,” Hawthorne says. “People may perceive the arts have had their influx and now it’s time to focus on more pressing needs.”

The whole article provides a lesson for those considering advocating for an arts tax of some sort. The basic idea isn’t bad, but the way it is structured and executed needs to be thought out. The example of Portland points to things people want to avoid. The name; the way in which it is collected, structured and discussed; all call negative attention to it.

It is worth reading the whole article because it also mentions the Regional Arts and Cultural Council’s (RACC) initiative to provide more equitable funding for smaller arts organizations. Back in 2012, RACC was starting to require more diversity on the boards, staff and eventually audiences of Portland’s arts organizations. In January, I had written about how the Arts Council of England was instituting similar requirements, forgetting that Portland had been working toward that goal for nearly a decade now.

Last year, RACC shifted their funding model to better align with this philosophy which includes size and economic diversity among its criteria. As a result, the larger organizations in town receive less of the art tax money than they once did.

Donate For The Tote Bag

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I don’t know how I missed it on Vox.com, but Non-Profit Quarterly recently pointed out an article the site about the effectiveness of swag in non-profit fundraising.

The TL:DR version is, other than instances when it reinforces your identity (i.e. NPR or New Yorker tote bags), it isn’t really effective in terms of raising more than the cost of the gift and processing. This is especially true in regard to the unsolicited gifts like mailing labels and Christmas cards some charities send you around the holidays in the hopes you will feel guilty enough to donate.

For the more detailed version: There are definitely times when those gifts can actually increase donations because they are tied to people’s identity:

Simran Sethi, a journalist who hops between North Carolina, Mexico, and Italy, told me she nudged up her donation from $50 to $75 once just to get the WNYC tote bag. “I just wanted to show my NPR pride!” she says. Lindsay Diamond, who works for the University of Colorado Boulder, admitted to ponying up more so she could snag a Tiny Desk Concerts hoodie.

…. Like Sethi, people may want them to show off their contribution or affiliation, or perhaps connect with other like-minded folks. Donation levels that feature increasingly valuable gifts do indeed promote “bump-up spending,” Yarrow says. “Even when we’re donating, we consider value pricing.”

I feel like I just read a conversation on Twitter this week where people were questioning whether an organization was saying they were committed to spending $8 million a year to raise $20 million (or something similar). If any readers saw that exchange, point me to it. (My recollection was that it was in regard to Boston Symphony, but I can’t find any such article so don’t quote me on that.) But practices like that are pertinent to this conversation.

But a bad design of the donor reward scheme can be problematic:

A man from Chicago — name redacted to protect the guilty — for instance, confessed to donating a dollar to NPR just for the socks. “It was a gift-of-any-size campaign, and I knew I was probably costing them money,” he says. (He redeemed himself by shelling out later on.)

For some donors, there may be a perception that the non-profit is wasting money on swag they could be spending on their cause:

If donors do end up contributing, they may chip in less than they can afford because the premium casts a pall over the organization’s financial efficacy. Or they might knock the charity off their lists entirely. Younger donors, especially, are becoming more strategic with their largesse.

Research bears this out. A 2012 study by Yale psychologists found that the offer of a gift reduced feelings of altruism regardless of whether the gift was “desirable or undesirable, the charity was familiar or unfamiliar, or the gift was more or less valuable.” The authors attributed this to a “crowding-out effect,” one that may create ambiguity about the donor’s perhaps-less-than-unselfish motivations for giving.

There was a mention in both the Vox and NPQ pieces that often the calculus being used is the long term value of a donor versus what you spend today on a gift for them. In other words, you may lose $5 sending them a donor premium today, but if they give $1000 over the next five years, it is worthwhile.

A 2018 study posted on The Conversation looked into that assumption:

Fans of using premiums to raise money for causes believe that they are worth it even if they simply get donors in the door but do not raise more money than giving them away costs charities. That’s because, at least theoretically, they can form a habit of giving. But some researchers have found that donors who are lured into giving by donor premiums are unlikely to give again when asked without an incentive.

What should nonprofits and donors take away from our study? We conducted this experiment with just one organization, but the preponderance of the evidence from our work and the findings of others suggests that unconditional premiums are not worth it.

Most interesting to me was a personal observation made by Niduk D’Souza at the end of her NPQ that donor rewards are used regardless of their efficacy due to the way development offices are evaluated:

However, it is this fundraiser’s experience that the metric most often measured, and presumably without coincidence, is one that is most easily aligned with nonprofit budgets and often a fundraiser’s own job performance metrics: how many donors were brought in this quarter, this year, by your portfolio, and how much did your portfolio raise, or is it worth, overall?

So, is it any wonder why nonprofits continue to give away crap?

It’s Annual Appeal Time?! My Papercuts Still Haven’t Healed From Last Year’s Envelop Stuff-A-Thon

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As Thanksgiving approaches, your anxiety level may be rising at the prospect of spending uncomfortable meals with relatives, engaging in an even shorter official Christmas shopping season than usual, and getting your annual appeal letter out.

I can’t help you much on the first two, but a couple years ago Fracture Atlas posted their helpful “Procrastinators’ Guide to Sending a Year-End Appeal”

Reading their guide might cause you a little bit more anxiety at first when they suggest the appeal consist of three different missives rather than one, but I promise there is a method in their apparent madness that aims to make the whole process productive for you. (my emphasis)

The centerpiece could be a 1-2 page letter mailed in a pretty envelope with a seasonal stamp. This will set the flavor for your whole campaign, aesthetically and thematically. Your “sides” could be a follow-up email about two weeks later, with a final email request within the last few days of the year. Make sure there’s a visual through-line in these materials and that they reference each other, otherwise the recipient may not recognize that the materials are related.

If you have read this blog for any length of time, you know I talk about the importance of marketing materials being focused on the experience of the participant rather than on the importance of the organization or performer. The appeal letter is no different. Juliana Steele who wrote the Fractured Atlas piece says the emphasis should be on the impact the donor can have and be positive in tone rather than focused on the organization and its frightening dire need.

While it may be true that your program, production, or exhibition will have to scale back if you don’t raise the appropriate funds, remind them of what you will be able to do with their support, not what you won’t be able to do. The holidays may have them stressed out — give them inspiration!

Other suggestions Steele makes deal with the logistics of the ask–including specifically asking for a donation rather than implying it. Projecting success is important, but not the appearance of wasteful spending. Steele says the letter should be printed on good paper, but nothing so fancy that people become concerned about organizational priorities.

It should be easy for people to return their check in a return envelop or make a donation online. The more steps people need to take to get funds to you, the greater a chance their process will stall along the way.

Of course, sometimes the hardest part of writing an appeal letter is just getting started. Take it from someone who learned to type on an actual typewriter–the best thing about word processing is that the time cost of writing more than will be ultimately necessary is near zero. Starting to write anything knowing you will edit it down moves you closer to the end goal faster than staring at a blank screen. (These blog posts don’t come easy a lot of times and often evolve a fair bit from the topic I started writing about.)

Steel provides the following advice along those lines:

Writing a letter that is inspiring can be challenging and anxiety producing. Honestly, all you can do is sit down and get words on paper. Turn off the television, navigate away from your inbox, read appeals from other organizations, and make a list of all the amazing stuff you do (and will do next year). After a while, you will have something to work with and build upon.

Colorblind Grant Evaluation Measures Aren’t

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There was an opinion piece on the Chronicle of Philanthropy website today by Antony Bugg-Levine, CEO of Nonprofit Finance Fund, discussing how the evaluative measures often employed by funders tend to discriminate against non profit organizations lead by, and serving, people of color.

He writes,

What I did not realize then was how colorblind application of financial assessment and funding practices can make it harder for organizations led by and serving people of color to get grants and make the most of them.

The problem often originates in the fact that these organizations don’t have access to networks of influence and financial resources that other organizations do.

So requiring dollar for dollar matches for grants or using rates of donations by board members as a measure of engagement and investment are difficult criteria for many non-profits to meet.

The same problem arises when using budget size as a point of assessment.

Determine grant size based on the value of the work rather than the current revenue of the organization: When you recognize the structural barriers that prevent many well-run and effective organizations from gaining traction, you come to see how distorted the link can be between an organization’s size and capacity. And the formal accounting rules that determine what counts as revenue make the problem worse. For example, pro bono legal advice from a corporate law firm counts as revenue. The many hours a volunteer spends reading to young people in a community center does not.

A better approach: Rather than creating rules that peg grants to a share of revenue, spend time understanding the value the work would generate and the full cost to undertake it.

Obviously, these evaluation measures don’t just present problems for organizations run by and for racial minorities. Many non-profit organizations run by racial minorities lack resources, but not every non-profit lacking resources is run by and for racial minorities.

Bugg-Levine provides a link to a guide recently issued by the Nonprofit Finance Fund which charts racially-based financial analysis and provides suggested alternatives.

There are some issues you might not immediately anticipate. For example, having access to a wealthy private donor allows organizations to take government contracts which tend not to cover full costs. Having the imprimatur of a government contract provides other funders with a greater degree of confidence in the organization, leading to better funding opportunities. But not having a relationship with a wealthy private donor makes it difficult to secure the government contract in the first place.

Another example identified in the chart is that:

Funders associate small organizations with community authenticity

Organizations will intentionally limit their revenue (often below $1 million/year) to remain eligible for “small organization” grants, because some funders will cut them off when they become larger. But, they still can’t make the leap to effectively compete against larger organizations for larger grants, given the dearth of funding options for organizations in the $750,000-$3 million/year revenue range.

Even an organization’s accounting method can be a source of bias. The indication that the organization employs accrual based accounting vs cash based accounting  favors better funded organizations that have the resources to pay for accrual accounting services because,

If an organization is using cash-basis accounting, which counts money when it is received or spent, rather than when it is earned or billed, their finances appear less stable. This can lead to suspicion about the soundness of their leadership and overall financial health, and create a perception that making a grant to this organization is riskier than if they were using accrual accounting

Lollipop Philanthropy

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When I was at the Creative Placemaking Leadership Summit last week, one of the other participants asked if there was a way to communicate to funders that they can’t just fund a program and forbid using the money to pay the people who will actually run the program.

I spoke up and mentioned she wasn’t alone,  this was a big topic of discussion among non-profits and cited Vu Le’s Non-Profit AF blog as a place where this is frequently addressed.

Along these same lines, I was happy to see FastCompany (h/t Artsjournal.com) is refuting the non-profits should be run like a business argument.  The case they lay out isn’t anything you haven’t heard before. They too mention the prohibition on paying people to run the program. It is good to see a business oriented magazine criticizing the practice. It helps circulate the topic outside non-profit circles.

One of the main things raised in the article is that while for-profit success is measured by effectiveness at making a profit, non-profits’ successes are measured by doing everything from treating drug addiction and diminishing gang violence to education about climate change and music lessons.  There is no easy metric for any of these, nor is there any relevance in comparing reduction in gang activity to an increase in musical aptitude.

(my emphasis)

…that hasn’t stopped some deep-pocketed donors from trying. In one case, a venture philanthropy denied a grant to the founding board member and chair of an organization that works with homeless kids because the “cost per life touched” ratio was too high, despite the fact that there was no analysis of how the group compared to others in its area. “Ratios seem rigorous, when in fact it was an inappropriate comparison, given the expense of reaching the different populations,” he says. The measurement didn’t take into account all the benefits that could occur in communities if these life changes stick either. To simplify the argument: “My friend said, ‘I could give everybody in the city a lollipop, and I would have touched a lot of lives.’”

That lollipop metaphor is a tangible illustration of the problem non-profits have been facing with some philanthropic entities. There is a desire for a large quantity of touch points on the cheap. Fleeting impact on thousands this year feels more satisfying than enduring solutions for hundreds over a decade.

Accepting Donations Is Increasingly Complicated Business

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While I have written about this before, of late it seems that the decision to accept a donation from someone is increasingly one requiring deliberation. An article on The Conversation lays out a case for either having a morals clause or time limits on any donation that involves naming rights.  Citing the number of non-profit arts, cultural and educational institutions who have refused to accept donations from the Sackler Family due to their ownership of opioid maker Perdue Pharmaceuticals, author Terri Lynn Helge notes it is easier to refuse a donation than to refund one.

As a nonprofit law scholar, I have seen that it’s much harder to sever prior arrangements with donors embroiled in scandals than it is to stop taking money from donors who are the object of public outrage.

[…]

When these scandals strike, charities face a dilemma – keep the money given by the now-tarnished donor or return the tainted funds. But returning the funds may be easier said than done.

Once the money is given away, it’s committed to charitable use. Returning that money just because the donor’s reputation is now sullied may get the charity in trouble with state regulators.

Helge mentions donations from Harvey Weinstein and Bill Cosby as cases where organizations began to experience negative perceptions of their brand and were faced with refusing a donation or making public statements distancing themselves from the donors.

Increasingly these are issues non-profits of any size need to consider as they accept and recognize donations from a variety of sources. Both returning the donation and grinning and bearing the bad publicity can be equally bad options:

They can give the money back, perhaps with interest. They can suspend programs or professorships named after the donors whose names have become an embarrassing burden, perhaps with threat of litigation from the donor for not fulfilling the charity’s end of the bargain. Or, they can continue to maintain the donor’s name and face public outrage.

[…]

Once the cost of doing nothing gets too high in the long run, charities may implement costly options to terminate the association.

That is why in my view, museums and other recipients of the drug-making family’s philanthropy could eventually redirect their donations. But that won’t happen until what they lose by honoring Sackler gift agreements becomes more exorbitant than satisfying all of the anti-Sackler movement’s demands.

Enacting Your Solution Or Your Funder’s Solution?

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Often when we talk about arts and cultural organizations applying for grant funding, there is mention of how organizations might try to recast what they are doing in a context that makes it appear that their work aligns with that of a funding organization. There might also be a mention of an organization creating a new program in order to qualify for funding with an eye to doing the least possible in order to use that funding for their core operations.

When there is discussion about how foundation agendas are shaping what type of work get done, it is often in the context of the contortions non-profits will go through to secure the funding or how they need to piece support together based on narrow criteria of what an organization will or won’t fund.

While we all agree this situation is bad for non-profits because it diverts resources from the organizations core activity, less discussed is whether funder agenda is shifting the core activity of organizations in an nonconstructive manner.

Non Profit Quarterly had a story about the research Megan Ming Francis conducted on the relationship of the NAACP and one of their first major funders, Garland Fund.  Based on records of the interactions between the two organizations, the NAACP reluctantly ended up shifting away from their efforts to get state and federal entities to address lynching and mob violence to align with the Garland Fund’s education and unionization agenda because Garland was one of the few groups willing to fund them.

From a Vox piece on Francis’ research,

Garland’s organization also started out with a firm commitment to not “attempt by promise or by the setting forth of conditions or by any other means to control the policy of any group or individual entrusted with this money or a part of this money.” That, though, eventually changed, according to Francis.

The Garland Fund was most interested in education and organized labor, two areas it saw as the most important foundations for improving society. Over time, according to Francis, it discouraged the NAACP’s work on racial violence in favor of a focus on black education, and effected a swing in priorities that still guides the NAACP today (though the fund stopped operations in 1941).

[…]

Francis points to evidence that black leaders at the time didn’t think of desegregation as the pivotal success that we see it as today. Other researchers have emphasized that the fight for Brown was somewhat out of step with what black communities prioritized at the time.

Francis refers to this shift in priorities as “movement capture.” In the podcast interview that accompanies the NPQ article, it seems little has changed in the grant application process. Francis paraphrases an NAACP member writing to a member of the Garland Fund, “I have no pride of authorship. I basically just regurgitated what you wanted me to write.”

If you work in an arts and cultural organization, you may not think that some of the programming you are doing is counter to your interest. After all, if schools aren’t offering arts programming, your organization needs to pick up the slack by going into schools or adjusting operations to allow for school group visits and matinees. Children are the future of the arts, right? But might it not be more in the interest of museums to be open later in the day to better accommodate visitations at night when people got off of work?

I don’t know that museum operating hours are really dictated by a perceived need to be available for visitation by school groups. Megan Ming Francis suggests that the influence of funders have in shaping standard practice is underestimated.

She worries that funders often assume they have a better picture of the problem when they might not — and she thinks funders underestimate the costs to the movement of grassroots organizations aligning themselves with the funding zeitgeist.

I hadn’t set out to draw the connection when I started this post, but I realized the question of whether your organization would be focused on school outreach if educating wasn’t such a priority among funders is related to an frequent topic of this blog of late: Would your operations and activities look different if you didn’t have to justify your value in terms of economic impact and test scores?

If this line of thought intrigues you, check out the NPQ article and listen to the accompanying podcast interview with Megan Ming Francis where she discusses movement capture and wonders how funding may change the goals of groups like Black Lives Matter.

Don’t Solicit Ads For Your Program Book

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Thanks to Drew McManus for remembering that Butts In The Seats turned 15 this weekend. Hard to believe I have been writing for 15 years now. Hopefully readers have found the content worthwhile.

Speaking of which….

Over on ArtsHacker today, I had a post on a very worthwhile subject– Unrelated Business Taxable Income.

I know, you are fighting to keep your brain from shutting down right now.

What that translates to for non-profit arts organizations is, among other things, any advertising you may have in publications, playbills, social media and web posts, etc., is considered an activity unrelated to your organizational purpose which means you need to pay taxes on it.

Now before you panic too much, placement of sponsors logos and contact information is permitted within the scope of your non-profit status. While advertising versus sponsorship may sound like a distinction without a difference, there are strict guidelines you need to follow.  There can’t be comparative or qualitative language, no pricing, no inducements/endorsements to use/purchase a product/service.

If this sounds like something you have run into trying to promote an event on a public radio station, that is exactly what it is. At one time I thought it was a characteristic of public broadcasting charters so they didn’t compete with commercial broadcasting. In fact it is a characteristic of non-profit status so it also includes school yearbooks, neighborhood sports leagues, community newsletters, etc.

The post I made isn’t a comprehensive discussion of the matter. I didn’t even try to tackle the recent change that made providing employee parking something non-profits need to pay taxes on. It is a good place to start before following up with an accountant or attorney.

On a semi-related topic, I also made a post about the detail to which a non-profit needs to go when valuing and acknowledging a gift from a donor.   Even if you think you know a lot about this subject, it is worth checking about because money from donor advised funds are viewed differently than those received directly from the donor. Given the growing popularity of donor advised funds, there are likely things you will want to learn more about from an accountant or lawyer.

You Need To Pay Taxes On Program Book Ads

Valuing and Acknowledging Donations

Cons Of Starting An Endowment

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Recently there have been some conversations around my organization and town in general about whether it is worthwhile to try to bolster an existing endowment. People have mentioned that there has been a trend away from establishing endowments in recent years. I started wondering what the thinking behind that was and what the alternatives might be.

It just so happens Non Profit Quarterly reprinted a piece that talks about the pros and cons of establishing and endowment.  On the con side is the issue is the idea that you are locking up money the organization could use now and disbursing it in the future when the same dollars don’t buy as much. Thirty years ago it may have seemed really attractive to learn that the organization would be receiving $25,000 a year from the endowment. In 1989 that could cover the salary for a position, but that money doesn’t go as far today. (Though there are plenty of places offering $25,000 as a salary.)

Current needs is the one that at least one of your board members will bring up, and is very possibly the reason why your board will vote not to have an endowment. “Why should we put a million dollars in a bank account when we can use that to serve a million more lunches?” Or buy a hundred thousand more books. Or facilitate a thousand more adoptions. Or renovate the façade of the theater. Many nonprofits are in dire need of more money, and most can at least think of an immediate way to use more….Some people go so far as to say it’s not ethical to lock money in the bank when there are so many necessary ways to spend it now. Before you know it, you have bad press and declining donations—and you wish you’d never thought of raising an endowment.

You may look jealously upon organizations receiving large payouts from their endowments, especially universities, but by and large these groups have a staff that is actively managing an endowment. A staff is required to grow an endowment to the size it yields enough to support your activities. But you need to have started with a large enough endowment to support a staff in the first place.

Why Do I Have To Call Dun & Bradstreet To Apply For A State Arts Grant?

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As we move further into the new year, many grant deadlines are starting to creep up en masse upon arts organizations. As you are filling out all the mandatory fields in your grant application, you may be wondering why you have to have a DUNS (Data Universal Numbering System) number in addition to your Employer Id Number (EIN), especially since they are both the same number of digits.

You may also be wondering why a commercial data firm like Dun and Bradstreet gets to dole out these numbers, instead of a governmental entity. Well, I don’t have all the answers, but I did provide a good number of them in an ArtsHacker post on the subject a couple weeks ago.

As I write in that post,

The simple answer is that your EIN is associated with your IRS tax records and the DUNS number is associated with your business credit score.

[…]

One reason the DUNS numbers are separate from EIN is that a DUNS number is tied to a physical address. This makes sense in the commercial for-profit realm since a branch of a company in California may have better credit than one in Florida, but there aren’t many non-profits that are so large that they have a single EIN but require different DUNS numbers.

Learning that your DUNS number is associated with your credit score may be cause for concern—how many non-profits are going to have a great credit score after all?

Given that overhead ratio has been used as a measure of effectiveness for non-profits, it isn’t out of the realm of possibility that someone is going to get the bright idea that credit score is a good shorthand for deciding whether a non-profit is being run well. This would be a really bad idea since the standards used to assess credit worthiness of a for-profit entity are inappropriate for non-profits.

But you know, non-profits should be run more like a business right?

In any case, if you would like to know a little more about DUNS numbers and how to get one for your organization, (or see if you already have one), check out my ArtsHacker post.

What Is A DUNS Number And Why Do I Need It?

Non Profits & Buying Locally – Good For The Community vs Bad For Overhead Ratio

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Back in September, Non-Profit Quarterly (NPQ) pointed to a new research study which has found overheard ratio is not a valid measure of organizational effectiveness. In fact, it there is a slight negative correlation between overheard ratio and commonly used measures of efficiency.

“…but our work is the first to approach it using efficiency theory—and we were able to demonstrate the problem using real-world data.”

….“In short,” Coupet says, “this demonstrates that not only is the overhead ratio bad at assessing efficiency, but also that using it to assess efficiency may actively mislead donors. We argue that nonprofit scholars, managers, and donors should move away from concepts and measures of efficiency based on financial ratios, and toward ones that embrace maximizing what nonprofits are able to make and do.”

NPQ says according to the study, overhead ratio is a poor measure of effectiveness because it doesn’t reflect what organizations are doing with their resources or what they “are accomplishing with their non-overhead spending.”

In other words, like I have written so often before, the value of what a non-profit does is not reflected by transactional data, economic impact numbers or test scores.

This being said, another part of the article raises the intriguing idea that if a non-profit is supposed to be working for the benefit of their community, shouldn’t they be focusing on buying locally rather at chain stores or wholesale warehouses? If so, the higher cost of buying locally would raise their costs a bit and impact their overhead ratio. But it may be worthwhile to do so.

Should we stop looking for cost savings that benefit our bottom line but lead to purchasing that harms the greater community? In other words, should nonprofits be considering (and be supported to pursue) their own “buy local” policies?

‘Nonprofits should be shouting about how much of their spending happens at locally owned, minority-owned, women-owned, veteran-owned or disabled-owned businesses. There is a multiplier effect in spending locally that shows that for every $100 spent at a locally owned business, $45 of that is re-spent locally, while national chains only spend $14 of that sale locally.’

This is an intriguing idea that has this author (a nonprofit executive who manages purchasing) feeling the financial pinch of a cogent ethical argument: If buying local supports healthy communities, and the mission and values of my organizations are tied to relevant healthy community outcomes, why am I doing my shopping at big box (including online) retailers?

This broadens the scope of what it means to be a non-profit in service to the community. Touting how much is being spent at locally owned business won’t necessarily smother the use of overhead ratio as a standard, but it has the potential to blunt the ratio’s use in an argument of a non-profit’s worthiness.

Play More Poker If You Love The Arts?

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Earlier this week I wrote about the negative impact casino construction can have on the viability of performing arts entities in a region. I mentioned the steps a coalition of performing arts organizations took to mitigate those effects in NY State.

Even as I was mentioning this model at the meeting I attended to those discussing the casino related lobbying efforts, I was thinking that a model similar to the one in New York might be attractive to state legislators if they thought they could have gambling revenue replace state funding for arts and culture.

This could be a problem for a number of reasons. For a long time state lotteries have been sold as a way to provide funding for education, but the results have often been mixed with some believing the lottery funding has allowed state governments to shift funding elsewhere leaving education funding generally flat.

According to the Brookings Institute,

“Some scholars have argued that lottery earmarks provide a net positive impact, despite some fungibility. One study, for example, estimated that a dollar of lottery earmark funds for K-12 education increased per pupil spending by 50 to 70 cents, with the rest of the money being diverted for other purposes. Others have argued that lottery earmarks lead state lawmakers to supplant education funding so much that states invest less in education over the long run.

This is because budget decisions are made in context of scarcity, in which allocating resources to one arena of state policy limits the ability to fund other programs. Therefore, when lottery earmark revenue emerges, state lawmakers may use lottery earmark revenue to supplant instead of supplement education funding so that they can free up general fund money for other purposes that matter to their constituents and avoid raising taxes in the process.

What also should be considered is social dissonance in this form of funding as recently suggested by James Doeser in The Art Newspaper, regarding the use of lottery proceeds to fund the Arts Council of England.

Since its introduction in the mid-1990s, the UK National Lottery has made a lot of poor people slightly poorer while equipping Arts Councils to enrich an arts sector that disproportionately serves the better-off. It is not hard to picture an old woman applying coin edge to scratch card, with no more chance of winning the jackpot than of stepping inside the gallery she has helped to build

[…]

Arguing for public funding for the arts would be much easier if our tax regime were more progressive, and those engaging with the arts more reflective of society as whole…. Thanks to an austerity-induced accounting trick, the replacement of tax by lottery funding means that the least well-off increasingly shoulder the cost of rich people’s pursuits. A lot of well-meaning and progressive people continue to benefit from this arrangement, but it is not fair and needs to be questioned.

Which is more preferable when it comes to seeking an increase in public funding, making yet another appeal to supporters to contact their representative about bolstering arts funding or encouraging supporters to play more blackjack?

(Yes, that is a huge false dichotomy)

What Would You Do If A Funder Encouraged You To Push Them To Do Better?

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I was skimming some entries on the Americans for the Arts blog when a couple sentences made my eyes visually screech to a halt and shift into reverse because I wasn’t sure if I read what I thought I did.

Lawrence Brad Anderson, Executive Director City of Salina KS Department of Arts & Humanities related a story about a prospective grant applicant in a situation I think we can all empathize with–though with a very atypical ending.

Our new staff member did an excellent job reviewing the grant guidelines and preparing him for the process, but as the meeting was wrapping up, I saw that something was still missing.

“May I share an observation with you before you go?” I asked. “Sure,” the artist quietly replied.

“I sense that you feel you may not be worthy of funding for your expressed need. This couldn’t be further from the truth. You have prepared as a professional in your field, you are active in musical performances, and your passion for what you do is evident. In addition to your own individual expression, I want for you also to consider being a mentor and artistic leader in this community. We need people like you to be a positive voice as an artist and a valuable member of this town. We may not always be able to anticipate your exact needs, but you have my permission to push us, ask questions, and encourage your peers to step up their game and get engaged.”

As I completed my statement he lifted his head and I could see that he was silently weeping. Whether this recognition was the cause, or as a man of color in a largely white community, he was unaccustomed to being affirmed in such a strong way. The experience served as an important reminder of the role and responsibility arts administrators serve in their community.

As I say, I think we can all identify with feeling despondent that our programs or organization is not suited to the particular criteria of a funder.

But it is pretty dang rare for a funder to tell us explicitly that we are well suited for their program, challenge us to expand our leadership role in the community and encourage us to push them as funders.

I think we would all join the artist in silently weeping.

We Believe There Is A Secret Phrase Even If You Say There Is No Secret Phrase

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I wanted to make another visit to the  piece on shared power and transparency in grant making F. Javier Torres and Leila Tamari wrote for Inside Philanthropy which I referenced in yesterday’s post.  I wanted to address this issue separately in its own post.

Torres and Tamari talk about the lengths they went to provide grant applicants with as much information about how they were applying their criteria as they could.

When we embarked on refining the application process for the NCPF in 2015, we asked ourselves: “How do we benefit by holding our cards close to the vest?” There was no benefit! As a result, we sought to provide thoughtful explanations for why we needed information in a certain format. We also pushed ourselves to remove as much jargon as possible.

[…]

At the next stage of our process (where approximately 7 percent of applicants were invited to submit a full proposal), we made the process more open by providing all applicants with what we’d actually be looking for in the full proposal and site visits. This is the same material we provided to panelists who reviewed all the projects and provided funding recommendations.

However, they said, in their effort to be as clear as possible about the criteria they would be employing in evaluating proposals, they also provided people additional information with which to game the system.

This showed up for us in 2016 when we chose to publish that we were particularly interested in projects focused on community development sectors underrepresented in our portfolio to date. We received hundreds of submissions in which applicants attempted to alter the goals and strategies of their projects into one of the sectors we listed as being “of special interest,” believing this would make them more competitive in the funding process.

More often than not, these projects would have been strong had they been framed in a community development sector more authentic to the work, instead of the ones we stated as priorities for the year. As a result, these proposals were received by our peer review panel as round pegs attempting to fit into square holes, and ultimately decreased their competitiveness.

There are frequent conversations in articles and blogs like mine about how organizations will undermine their operational effectiveness by pursuing grants that ill fit their organization and then by going through the contortions trying to execute grant activities alongside the core programs for which they really wanted the grant money.

Less frequently do funders tell the non-profit community that it was clear to them applicants were proposing something for which they were ill-suited and they would have been more effective taking an approach that reflected their core strengths.

As one who has served as a grant panelist, I can tell you it is often clear that organizations are trying to change color to suit the grant program criteria. It is just that few organizations will come out and generally encourage applicants to avoid taking that approach.

By the same token, the unequal relationship dynamics and opacity Torres and Tamari say the National Creative Placemaking Fund (NCPF) was working so hard dismantle does encourage people to try to game the system.

If you aren’t clear what a granting entity wants, there can be a perceived benefit in correctly guessing the secret combination of words that the granting entity has determined will unlock the funding. There may not really be a narrow set of phrases the granter is looking for, but the opacity of the process means that getting funded reinforces your confidence in your superior ability to read between the lines of proposal guidelines.

Basically, I think in some respects applicants have been conditioned to try to game the system as much as possible. Faced with funders who say they are being completely earnest about what they are looking for, some applicants will be convinced there are some unspoken criteria with which they will align and enable them to gain funding.

Varied Advice & Insights On Creative Placemaking, Economic Impact

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As a follow up to yesterday’s post on the Creative Placemaking conference I attended, I wanted to share some general thoughts and ideas I had picked up.

Regardless of whether the setting is urban, suburban or rural, there are a number of communities experiencing really difficult times. A number of panelists discussed the need to address the community trauma before you ever talk about economic stimulus. You can’t just walk in and position something as a solution to the problems in the community until those problems are aired and people have a sense that they can move forward from there. Otherwise the issues will likely continue to fester and undermine the foundation of what you are trying to accomplish.

When it comes to investment and grant making in rural communities, it probably won’t come as a surprise to anyone that one of the factors contributing to the low level of investment is geographic remoteness. David Stocks of the Educational Foundation of America (which ironically is not involved in education) talked about how program officers will need to invest a lot more effort into bringing support to rural communities.

They might need to take a plane to a regional airport and then drive 2-3 hours before they reach a community. There is also the issue of trying to identify what organizations would make good anchor partners for the work they do.  There is a need for both funders and community organizations to work at expanding their relationship networks to increase the chances that their orbits will intersect.

Marie Mascherin who works for New Jersey Community Capital, characterized her organization primarily as a lender. She talked about how lenders viewed placemaking activities which was a perspective you rarely get. All the same, she warned those in attendance that her organization was atypical in that they got a lot more involved with the community and projects they were working on than most similar lending organizations.

John Davis who was involved with bringing vitality to both New York Mills, MN and Lanesboro, MN passed on a piece of advice he had received from a college professor – don’t make excuses, even about money, for not finding a creative solution. Basically, don’t let lack of money (or other things)  become default excuses about why things can’t be accomplished. In a rural setting where resources are scarce, you pretty much have to try harder to find creative solutions.

(Honestly, “work even harder and don’t make excuses,” wasn’t something I wanted to hear, but wasn’t exactly news.)

Davis also talked about an argument he made to a local government that was balking at renovating a building. He noted it would cost them $35,000 to demolish the building or they could invest $35,000 into renovating the building and have a more valuable property they could sell later if his project failed.

His project didn’t fail, but that concept dovetailed in an interesting way with a comment Ben Fink of Appalshop made about a prison project being proposed near Whitesburg, KY. He said that the $300,000,000 prison was being sold to the community as, at best, creating 300 new jobs. He noted that was $1,000,000 a job–compare that to how much benefit $1 investment in arts and culture has for a community.

It occurred to me that is something to look into and leverage proactively with governments and decision makers. Rather than waiting until it comes time to ask for funding to be renewed, when a discussion comes up about providing tax breaks or subsidies for companies, it might be useful to mention that $1 invested in creative placemaking/arts/culture/education in the community is more efficient.

While I am on the subject of economic activity, in one session I bluntly asked Jeremy Liu of PolicyLink about the veracity of economic impact claims being made by organizations and communities. He said if they are using analytic tools like those offered by Implan, the numbers are dependable.

In the past I have mentioned my concern with arts and culture organizations arguing for funding or policy changes citing the benefits of art and music on learning and test scores when such benefits are only weakly supported or have been debunked.

What has worried me is that decision and policy makers will learn about the lack of evidence for these claims and perhaps actively wield it against the arts community. By the same token, I have often wondered at the rigor behind claims of economic impact of creative activity in communities and feared what might result if they are debunked.¥

A few other tidbits people offered-

Don’t become hyperfocused on placemaking. Don’t value place or a project over the community. Even if you are in a group, no project is completed in isolation.

If you recall in the very beginning of my post yesterday I mentioned that I gained an appreciation and broader perspective on the different roles that contributed to a placemaking project from governments to funding/loan group to community members to the people executing the work, placemaking is a function of many entities working together.

I feel like I am citing him a lot in these last two posts, but I appreciated Ben Fink’s insights about establishing relationships with people in the community. He said the first real shared connection you will make with someone is rarely associated with the project you are trying to accomplish. As an example, your aim may be to solicit participation in a building renovation for a maker space but the initial basis of your relationship is a shared interest in 19th century steam engines.

He said that building community support and participation happened in the same way friendships develop. It is heavily dependent on the dynamics at the formation of the project. If participation is by invitation only, one person ends up being in charge. If you form a clique of interested parties, it becomes insular. But if the project begins with the intention of leaving the door open, interested people will start to gravitate toward the project as they see work happening.

¥- None of this compromises my assertion that while arts and cultural activity may generate economic activity, steady employment, positive social outcomes and quality of life, the none of this is a measure of the value of arts and culture.

Enough Sins To Go Around

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A couple weeks ago Ali Webb wrote the provocatively titled Philanthropy’s Seven Deadly Sins on Non-Profit Quarterly.

According to Webb they are,

Blindness to privilege
Dismissing community knowledge
Misplaced accountability
Poor partners
Failure to learn
Risk aversion
Lack of transparency

Some of the sins were more specific to philanthropic foundations than non-profit organizations in general, but I saw some parallels with topics I have discussed in the past.

I am relatively sure most people recognize that “Blindness to Privilege” is a significant issue right now.

Carlisle observes that, “There are increasingly few places in the country where there’s not going to be significant racial and cultural differences…where people who have been very sheltered or in dominant culture settings are beginning to say, ‘Wow, we are fish in water. We didn’t know we were fish. We didn’t know we were swimming in water.’”

Don Chen, Director of the Equitable Development Team at the Ford Foundation, remarks that he wishes he “had a dollar for every organization that comes to me and says our board came up with a new strategic plan, and we are going to focus on equity. These same people aren’t talking about equity as a core value or a core component of their mission; they are often talking about equity as a topic. That’s a warning sign for me because it could be dropped like any other topic.”

In the sin of “Dismissing Community Knowledge,” I saw some familiar phrasing.

Keller observes that too often, “we ride into communities, stand before them, and tell them what they need to do to solve their problems. Then we ride out, expecting programs to be scaled and sustained.”

“Foundation people tend to over-intellectualize but under-experience the challenges of those they seek to serve with no authentic proximity to the issues,” says Carlisle. She continued, “The validity that comes with seeing and understanding different world views, which are not dominant culture, can have extraordinary outcomes.”

[…]

Chen calls it “drive-by grantmaking,” where foundations make a grant and then go away for a year or two. “Local folks have a BS meter and they know if you don’t trust their knowledge,” says Harris.

For me, this echoed what Marc Folk of the Toledo Arts Commission said about riding into a community on a white horse and Margy Waller’s “We’re From The Arts and We Are Here To Help,” post I wrote about two years ago. Likewise, Ronia Holmes piece about arts organizations being bad at community outreach which I also wrote about also has resonance with this “sin.”

From a recipient point of view, the “Failure To Learn” sin encapsulated a lot of the issues non-profits face today with the expectations of funders. If you read Vu Le’s Nonprofit AF blog, you will be familiar with these gripes.

“In philanthropy, we don’t always clean up our messes when we change priorities and make transitions.” Hegarty offers that the unwillingness to learn may stem from “a tendency to think we are the smartest persons in the room and the assumption that we have all answers and understand all the angles.”

[…]

Another possibility that Chen offers is that the field is “delusional” about what was or could be accomplished with the amount of money offered. Sometimes, Chen said, the sector believes it is “smarter than everyone who ever came before. Especially when working in in under-resourced, low-capacity places, philanthropy tends to think it has super powers.”

[…]

“We ask a lot of our grantees and then what they share with us goes into a black hole. We never do anything with the information to further the work,” said the officer. “Without processing the information and developing a vehicle to get it back to the grantees, much learning is lost.”

All of this is something to think about. It is difficult to effect the change we like as fast as we think we should, but being reminded of these concerns on a semi-regular basis feeds progress.

Fundraising Is Now Everyone’s Job Too

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Yesterday I noted that I was interested to learn that $5 million in revenue was something of a dividing line between theaters which supported themselves primarily by ticket revenue (above $5 million) and those that received the majority of their support via donations (below $5 million).

That doesn’t mean that the larger revenue theaters don’t need to do much fundraising. Back in January there was an article in American Theatre that talked about how artistic directors are increasingly expected to join the executive directors and development staff in soliciting donations.

For some years now I have written about how marketing is the responsibility of everyone in the organization. It appears this is becoming the case with fundraising as well.

Michael Ritchie, artistic director of Center Theatre Group … puts the situation more urgently.

“Everyone in our building is ostensibly a fundraiser,” he said. “That’s the new reality for nonprofit theatres. We are all more dependent than ever on the success of our fundraising efforts. Fundraising is no longer optional for an artistic director; it’s an imperative.”

In an August 2017 American Theatre online article reporting on artistic leadership succession, Disney Theatrical Group president Thomas Schumacher suggested a reason for the new urgency: the global economic crisis of a decade ago. “Any artistic director who gets hired today will also be expected to go out and raise an awful lot of money,” said Schumacher, who spent five years on staff at the Mark Taper Forum. “That’s just different.”

The artistic directors they interviewed for the story varied in how comfortable they felt being part of the solicitation efforts. Some were comfortable with it from the start, others mentioned the fear and anxiety they felt. At the same time, many spoke about financial difficulties which had forced them to become more adroit in these types of interactions. Many estimated they spent between 25-30% of their time on fundraising, though one estimated it much higher:

Abe Rybeck, the founder and executive artistic director of…The Theater Offensive in Boston, said, “Sometimes it feels like I spend 120 percent of my time doing fundraising, and it also feels like that’s way less than I’m supposed to be doing.”

One thing I was really curious about after reading the article was whether the added responsibility of fundraising had changed the perception of the artistic director’s role in an organization. For a long time there was something of a stereotype that the managing or executive director of a theater was there to keep the artistic director’s ambitions in check. While there have definitely been some contentious power struggles in this arena, I think the stereotype may have served to perpetuate the roles by giving license for the artistic director to say yes until being told no.

This may have been another facet of the larger general stereotype that artists didn’t need to know about business and such considerations would only serve to limit their vision. Likewise, getting artistic directors involved in fundraising might be a manifestation of the recent general push for artists to cultivate business skills.

Since artistic directors are being asked to get involved with the one area of a non-profit organization everyone would be happier to avoid, I am hoping it has gone a long way toward dispelling the perception that the artistic directors are the irresponsible dreamers of the organization. Reading what the artistic directors had to say about participating in donor solicitations, it is pretty clear they have an appreciation of the costs of executing their vision.

Knight Fdn Looks To Fund Technology Connecting People With Art

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A heads up to people who have, (or know people with), innovative ideas using technology to connect people with arts and culture, the Knight Foundation is looking for project ideas via the Knight Prototype Fund.

Unlike some of the other projects the Knight Foundation funds, these projects don’t need to be set in the communities it traditionally supports which is why I wanted to bring it to everyone’s attention. As the prototype term suggests, they expect some of the concepts to be in the early stages of development.

Applicants don’t necessarily have to work for an organization. We’re looking for ideas from arts organizations, artists, technologists, designers, educators, researchers and others inside or outside of institutions who are eager to experiment. We’re open to diverse approaches and perspectives on the use of technology to connect people to the arts, and seek to identify projects that have the potential to be replicated by others in the field.

What can we build to help arts organizations expand their use of technology? How can we use the qualities of new mediums to create unparalleled experiences? How can we replicate solutions, so that more in the field benefit? How can we learn more about the people we are trying to reach and design solutions that understand their needs? How can arts institutions provide magic outside of their four walls? How can cultural organizations breathe warmth into technology?

[…]

We hope to invest in projects that have provocative questions at their core that can only be answered through the act of making them a reality. Grantees will join together over a nine- month sprint to learn innovation techniques and test ideas.

They anticipate the average grant will be around $50,000. Deadline is March 6. They are hosting an online Q&A from 1 to 2 pm ET on February 21 (connection instructions at bottom of the page)

As an example of the type of thing the Knight Foundation has been doing lately, they partnered with the creators of Pokemon Go to see if similar games or tools could help build community.

It sounds like they would be open to projects that pushed the envelop even further as well as repurposing existing tools in a manner few people have considered.

One of the things I most appreciate about what the Knight Foundation proposes is that they are going to provide applicants with training in innovative methods as well as bringing them together to learn from each other. This acknowledges that innovation isn’t generated in a vacuum or emerge from a lone genius working in a garage, but rather builds on past work in new ways, often in collaboration with others.

You Can Have All The Charity Golf Tournaments You Want When You Own The Courses

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Generous donations to a non-profit can often become more of a burden than a blessing which is why it is important to have a good donation policy and properly evaluate the impact of the donation upon the organization.

According to a story in Non Profit Quarterly, this is exactly the challenge being faced by the Great American Songbook Foundation in Carmel, IN.  The organization with a budget of less than $1 million was approached with a non-strings attached donation of an estate valued at $30 million.

….includes a couple of golf courses, a pool, a fully furnished 50,000-square-foot main house, and a clubhouse—all set on 107 acres. There are no conditions on the contribution.

The upkeep alone could easily eat up the entire current budget of the organization, what with the nine staff required to maintain the property, and it should be pretty darn clear to any manager or board who have taken a trip or two around the block that such a gift could potentially ruin the organization.

[…]

This isn’t the first time the Simons have tried to move the property, which has covenants that disallow certain kinds of development. In fact, the property has been on the market since 2014 at $25 million with no takers. Additionally, a previous attempt to contribute the property to the Indiana University Foundation in 2008 fell through.

The Songbook Foundation Board is going to take three years to study the use of the estate which is probably a wise course of action. The NPQ article notes that since they accepted the donation of the estate, they will bear the costs associated with maintaining the estate during that time.

There are a number of options available to the Songbook Foundation according to another article.

The foundation could decide to use the main house as a museum and center of operations, subject to a rezone. The golf course land could be sold in a plan similar to Estridge’s but with lot sizes that meet the covenants. That money could be used to support operation of the museum.

The entire property, including the main house, could be sold to a developer. That money could be used to support the foundation or build the Great American Songbook Museum closer to The Palladium, possibly next to the soon-to-be-built luxury hotel, The Carmichael.

[…]

“It’s a very generous gift,” Brainard said. “It’s an asset that could be used by the Foundation to leverage for future donations. It’s very important to include neighbors in any conversation about any use and then proceed in such a way that enhance’s property values in the area.”

…He [McDermott] said charity events could be held on the golf course and added that a donation this size is a signal to other potential donors who were thinking of writing a check.

I have to admit, given the number of fundraisers that occur on golf courses, I was amused by the thought that these guys may be the only non-profit to own part of their “supply chain.”

If they decide to keep the properties, they will almost definitely need to set up a separate administrative body to keep themselves from getting bogged down in the business of overseeing the estates. Not to mention there might be issues that conflict with their non-profit status. The unrelated business incomes from the estates could potentially be 25+ times greater than that of the non-profit. It will be really interesting to see what they decide to do.

I made a post on the ArtsHacker site about two years ago that included lists and links to various resources one can use to create a gift acceptance policy and to evaluate the suitability of accepting gifts when donors approach the organization.

Sending Love To Those Calling Attention To Important Theater Issues

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Gotta give a shout out to Non-Profit Quarterly for putting up two theatre related articles yesterday. I wanted to call attention to it to show appreciation for to them for covering arts concerns.

(n/b – slight mistake -during editing I noticed Ross Jackson’s article was published on Jan 29, 2016, though it appeared in my social media feed today.)

The first piece by Ross Jackson on Blackness in Nonprofit Theater reinforces a lot of the conversations that have been occurring lately about the recognition and opportunities afforded people of color.

It’s publication is timely just as we move into February when many arts organizations offer their Black History Month programming. Jackson rightly criticizes this approach, (or having any sort of “ethnic slot”), as tokenism. I think many more arts organizations recognize this than had 10-15 years ago and have taken steps to remedy this.

Jackson goes on to point out some less obvious, but equally problematic choices that are made in casting and programming decisions.

More troubling is that the lone black cast member is usually male. Black women are often cast only when the script calls for them or to fill promiscuous and degenerate roles…for example, auditioning a black actor who has the talent to play Rosalind, the witty, courageous leading lady of the court from Shakespeare’s As You Like It, whom the audience is made to feel deserves love, and casting her instead as Phebe, the entitled, arrogant, shepherdess who is criticized for having too many lovers. Rosalind stays white.

[…]

Furthermore, when casting black actors in nonspecific roles, it is not at all necessary to reimagine or reconceptualize the production by placing it in the inner city or adding what a middle-aged white male thinks of as a “Hip-Hop influence,” in order to “excuse” the decision to have black bodies present onstage. We don’t all walk around with a bassline underscoring our every action; there is no reality to that, so do not try to insert it for us.

He goes to provide other examples which place black actors in the status of otherness. He proposes ways in which organizations can examine their choices and processes.

[hr]

The other mention of theater on Non-Profit Quarterly was about how theaters are becoming more effective at cultivating individual donors to support their work as corporate support wanes. The piece draws from an article in American Theater.

The American Theater article is worth reading because it goes into greater detail than the NPQ piece. However, Eileen Cunniffe does a good job summarizing on NPQ. The reason why many theaters have become more effective is because they are using predictive analytic tools and engaging in one-on-one relationship building to a much greater degree than in the past. That isn’t necessarily good news for every theater company who lack the resources to keep up.

…the newer approaches to donor cultivation that have been successful for nonprofit theater companies are also more labor-intensive—sometimes requiring additional development staff, other times requiring more flexibility from development staffers in terms of when they work, adding more evening and weekend hours to woo donors—again, including board members—before and during theater performances. He also notes that fundraisers must pay more attention than ever to generational differences among individual donors.

Finally, these approaches are likely to bear more fruit for larger theater companies that can afford to invest more in fundraising; they may be unnecessary for the smaller companies, which already know most of their individual donors quite well; and the better they work for the larger companies, the more they may disadvantage midsized companies, which may not be able to invest in additional staff or bells and whistles like predictive modeling.

If They Can Be A Successful Non-Profit, Why Can’t You?

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If you feel like you don’t have a clue how to run a successful non-profit and are just winging it, you probably know that you are in good company.

If you are wishing there was a book someone could give you for Christmas that explained the process to you, according to a recent piece on The Conversation, such a book doesn’t exist because no one really knows the answer.

The reason why it doesn’t exist is due to the way the successes of non-profits are studied. The author of the piece, Fredrik O. Andersson, basically blames human nature and biases for this.

When people want to know what works, they tend to focus on the successes which means they learn very little about what contributes to failures. This is known as selection bias, the most famous example being Abraham Wald’s counter intuitive suggestion to armor the parts of WWII bombers without bullet holes since presumably that is where the planes that did not return got hit.

Or as Andersson writes:

Imagine that researchers want to investigate and isolate the factors that make gamblers successful. If they study only the gamblers who win all the time, they would reach the obviously false conclusion that gambling is always profitable

Carter Gillies who frequently comments on the blog has often brought up selection bias as a problem in the mindset and approach to non-profit problems. Now here I am writing about it, validating the point he has long held. I hate it when he is right so often and identified these issues so far in advance.

Except, Carter would point out this is an example of selection bias and one of the other problems Andersson identifies- flawed memory. I am only focusing on those times Carter was right and only remembering those times because I have later come across someone else reinforcing his view.

Andersson notes that any research performed directly on non-profits only provides a snapshot view of what is making them successful (or not) at this moment of time and doesn’t really provide insight into the process leading to that success. The researchers are left to ask the non-profit board and staff  to relate what factors lead to their current state. The problem is, their memories of how things evolved is often very flawed.

This is a huge issue because everyone from founders to donors and other funders are likely to look at successful examples and determine that is the path to success that should be followed either by themselves or those they fund.

Andersson writes about working with non-profit entrepreneurs where he asked them a series of questions and then followed up 6-14 months later and asked them to recall their answers. (my emphasis)

I asked participants in the workshop about three things: why they wanted to start a new nonprofit, where they anticipated getting funding and how likely they believed it would be that they might actually launch a new organization.

[…]

Three out of 10 recalled having a different reason for wanting to start a new nonprofit than they asserted in the first survey. And both of those reasons, of course, could not be accurate.

Nearly half incorrectly recalled the source of funding they had anticipated. The expected chances of a successful launch also differed. The people who did launch a new nonprofit were somewhat more likely to say they had anticipated this success during their second interview. The people who failed to get a new nonprofit up and running were nearly 20 percent less likely to say they expected to succeed during their later interview.

[…]

Since stories are malleable, the best way to reduce the risk of hindsight bias is to observe startups from the very beginning and follow them over time.

Some people forget, others get the details mixed up and others ascribe a rationale they didn’t have in mind at the time when they’re asked about events that have already transpired.

While his sample size is admittedly small, I suspect that this general trend would be observable with larger numbers. I have written about this general issue before with artists mis-remembering the amount of work that went into their first success and attributing a big break to luck rather than effort.

Breaking Even But We’ll Be Broke If Something Breaks

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The National Center for Arts Research (NCAR) released the results of a study last week that, while not the most cheery news to release during the holiday season, is not terribly surprising.

Looking at the data of 4800 arts organizations, they found that it is becoming increasingly difficult for arts groups to meet expenses. They based these assertions on an evaluation of three data measures: unrestricted surplus before depreciation, operating surplus before depreciation and operating surplus after depreciation

Looking at unrestricted surplus (before depreciation), the average organization saw an unrestricted surplus of 2.1% of expenses in 2016. In the same year, overall operating bottom line (before depreciation) was 0.4% of expenses—virtually break-even. However, surpluses fell to a negative 4.2% when factoring in depreciation, meaning that the average organization is not reserving sufficient funds to repair and replace their fixed assets, which can lead to future challenges, particularly for organizations with high levels of fixed assets.

Somewhat surprising, smaller organization were doing better than larger ones when the three measures were applied.

  • Smaller-budget organizations, with lower fixed assets and less fixed costs, demonstrate the highest surpluses by all measures, continuing a four-year upward trend. Conversely, larger organizations tend to end the year with deficits, continuing a four-year negative trend.
  • Across all sectors, small organizations buck the overall sector trend—i.e. even in sectors where bottom lines trended downward, the smaller-budget organizations within the sector actually grew, sometimes by over 50%.

However, it should be noted that these three criteria aren’t necessarily the only ones that matter in organizational financial health. NCAR’s next step is to:

…take a look at working capital and access to available cash. It may turn out that organizations with high fixed costs and fixed assets also have sufficiently high levels of cash reserves to cover annual shortfalls and future asset repair and replacement. If not, organizations might consider how they can become more nimble if a break-even budget is a goal.

It is worth looking closely at the study data and methodology to get a better sense of what this all means.

For example, when deciding what budget size constituted a large, medium or small organization, they used different numbers for each artistic discipline. A $2 million budget makes a large theater or dance company, but a small art museum and a very medium sized opera or performing arts center.

Their notes on trends in the Opera sector say that one organization heavily skewed the results for the whole sector and that if left out, there would be a more positive trend. There are similar notes in other sections, especially breakdown by geography where nearly every metro region had an outlier skewing the data.

The other area of the report that was interesting was their Driving Forces section which left me asking “Why Is That…?”

Total Unrestricted Revenue Drivers

  • Having more arts education organizations, music organizations, and opera companies in a community tends to raise the unrestricted revenue tide for all organizations in these sectors in a market, while having more performing arts centers tends to lower the unrestricted revenue for all organizations in this sector.
  • As the level of individual philanthropy in the market increases, unrestricted revenue goes down.  The fact that there is more giving in a market does not necessarily mean that it is being directed to arts and cultural organizations.  Unrestricted revenue also tends to be lower in more densely populated communities and those where with proportionally more Asian Americans.

Operating Revenue Drivers

  • Operating revenue tends to be higher for organizations that target young adults or African Americans, and with higher levels of local and state funding.
  • More public broadcast activity in a market tends to drive down arts and cultural organizations’ operating revenue.

I am making a broad assumption that the observation about public broadcast activity is a result of competition for donated revenue. What I wondered was if there was a benefit to underwriting sponsorship on public broadcasting that helps offset that effect by providing additional earned revenue. Or is there no sense that one should support the activities of cultural organizations that support public broadcasting?

What I wondered about the observation regarding unrestricted revenue tending to be lower in densely populated areas was if this meant people in densely populated areas placed greater restrictions on the way funds were used or if they simply gave less. In the context of the sentence that precedes it, the answer would seem to be that people give less, but that doesn’t necessarily need to be the case.

It would be interesting to know if people in less densely populated areas placed fewer restrictions on their donations, perhaps implying a higher level of trust in the organization or a confidence in their ability to evaluate the effectiveness of the organization.

Scratching An Itch

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There is a story I first saw in Non-Profit Quarterly that has been bothering me for a couple weeks. San Diego based arts organization ARTS (A Reason To Survive) is apparently in danger of closing after it’s founder left and replacement subsequently quit after four months.

While this is unfortunate and regrettably not as uncommon a story as we would like, that isn’t what bothered me. What has been something of a low level irritation since I first read the article was a quote from the founder, Matt D’Arrigo, in the original article about the financial difficulties.

“It’s the classic tale of a founder transition,” said D’Arrigo, who’s back at ARTS as a part-time consultant until the nonprofit is on stabler ground.

While he would certainly be in a position to know best since he is there on the ground and there may be elements to the story that remain unreported, what made me think this wasn’t the real problem was something the woman who replaced him said.

…Remmell said that even after she got a sizable grant to turn the organization around, she recommended the “indefinite suspension of all operations and an organized closure” because of a lack of immediate general operating funds. In an interview, she said that the grant and other money the organization had in the bank was earmarked for specific programs and infrastructure and couldn’t be used on other costs to keep ARTS going.

D’Arrigo acknowledged that Remmell walked into a difficult situation.

“We never had a huge financial cushion,” D’Arrigo said. “Part of my burnout was that I was constantly on a hamster wheel of raising money. My job was constantly keeping it together … that’s one of the reasons I left. And it wasn’t as strong as was needed in order to successfully do a founder transition.”

When I read that, I immediately thought that the real problem was that so much of their funding had restrictions associated with it and there wasn’t much flexibility to use the money for general operations. Despite all the success the organization had realized, including an Oscar winning documentary about one of the homeless teens they helped, they couldn’t find anyone willing to provide unrestricted funding.

Once my initial indignation about the non-profit funding environment passed, I recognized that the problem might also be rooted in a failure to diversify their funding sources. Looking at their most recent 990, their earned revenue was about 18% of their budget with the rest in grants and donations. If the founder was feeling burnt out by the constant need to fund raise, he may not have had the opportunity to identify sources that would provide unrestricted funding or develop programs that could generate additional earned revenue.

In any case, I don’t think this is a case of founder transition at all since it doesn’t appear any of the challenges facing the organization emerged after his departure. There are probably lessons in here about not letting your ambition outstrip your capacity to generate revenue.

The fact the organization wasn’t moderating their ambition might be cause to closely monitor how funds were being deployed. However, the idea that their funders and donors didn’t might not have trusted them enough, despite their successes to loosen restrictions on how money was used, sticks in my craw.

Someone Loses When Everybody Wins

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I would swear sometimes that Seth Godin is spying on me and then writing blog posts based on what I am thinking at the time. Or maybe he is just good at writing stuff that you can easily project your own experiences upon.

In any case, today he wrote about how you can make people feel like outsiders even if that is not your intention.

You can’t have insiders unless you have outsiders.

And you can’t have winners unless you have losers.

That doesn’t mean that you’re required to create insiders and winners. All it means is that when people begin to measure themselves only in comparison to others (“How did I rank?”) then you need to accept the impact of those choices.

It’s entirely possible to be happy and engaged and productive without creating this dynamic. But in a culture based on scarcity, it’s often easier to award or deduct points and to keep a scoreboard instead.

Just yesterday I cited Nina Simon’s Palo Alto TED Talk where she talks about this very idea. In her talks and book, The Art of Relevance, she mentions that even if you are providing more opportunities for a wider range of people and not reducing service or access to the demographics you have long served, there will be people who will view themselves as having lost out in the process.

I have written about two of Nina’s talks on the subject before so I won’t expound too much on the subject except to reiterate Godin’s point that you need to understand people may evaluate their situation in these terms.

Godin’s last sentence is particularly applicable to arts organizations who definitely operate in a culture of scarcity and are apt to adopt score keeping.   The state arts council or large foundation may be pleased that they have been able to increase funding in your community by 25% over last year. Instead of viewing this as a testament to the burgeoning creative vitality in the community, it can be easy to focus on the fact that another organization got more than you even though your own funding didn’t decrease, or decide you would have gotten more funding if not for the 5 new organizations that emerged in the last two years.

From this perspective, you might begin to empathize with the long time insider who insists they have lost out even as you believe everyone in the community should be excited that your hard work and sincerity opened new doors for a wider range of people without closing off existing opportunities.

Nobody Wants To Play Find The Non-Profit

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I have mentioned before that people don’t normally perceive a difference between non-profit and for-profit cultural organizations. Colleen Dilenschneider has a good summary of the research showing this.

What makes people care about the difference between for-profits and non-profits is the positive social impact that the organization is achieving.

Dilenschneider writes:

Nonprofits do not “own” social good. Corporate social responsibility is a necessity for companies today. There are countless articles on the importance of for-profit companies doing good. It is a key tactic for gaining customers and increasing sales.

Being good at your mission is good business. Data demonstrate that organizations highlighting their missions outperform those marketing primarily as attractions.

Interestingly, this is the one area in which non-profit identity definitely works in favor of their tax status. In a piece on The Conversation that Non-Profit Quarterly cited last summer, researchers found the following (my emphasis):

In one study, we asked people to donate money to an organization supporting literacy and education. The only difference was that some people were told the company was a for-profit social venture – it had a social mission and also made a profit. Other participants were told it was a nonprofit. People gave 40 percent less money when they believed the organization was a for-profit social venture.

In another study, we gave people money and asked them to purchase a decorative notepad from one of two organizations. When given a choice to buy it from a nonprofit or a for-profit social venture, nearly two out of three people went with the nonprofit.

It seems people don’t think companies can make a profit and support a social cause at the same time.

These findings along with Dilenschneider’s data may emphasize the value of highlighting your organizational mission and the impact you have over encouraging people to engage with you in a commercial manner.

Before you get too excited thinking this could be good news if you just change your messaging, the researchers in The Conversation had additional insight that recalls our old nemesis, Overhead Ratio.

…emphasizing a social cause makes people think the company is altruistic. When the company also makes money, this flies in the face of a belief that it’s generous or altruistic. When companies have a social mission, people tend to think that all money should go to the social cause…

This doesn’t mean that nonprofits always win though…when people were told the nonprofit was known to have excessive spending, the majority of people flipped and bought their notepad from the for-profit social venture.

Incentive To Throw An Expensive Gala

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There was recently a piece on The Conversation which, contrary to my expectation, said that tax deductibility rules allow charities to throw high priced galas and still maintain a low fundraising expense ratio.

The costs of a fundraising event attributable to things donors enjoy, including food, drink and auctioned items, don’t have to be recorded as fundraising expenses. Instead they can, in accounting jargon, be “netted” against donations.

In other words, if a donor pays $1,000 to attend a gala but gets a swag bag of goodies that cost the charity $900, the event reflects a (net) donation of $100. It does not have to treat the $900 spent on the bag as a fundraising cost. That approach, in turn, helps keep the costs associated with throwing fancy galas under the radar of ratings agencies, since many of the costs are not considered fundraising expenses but instead are buried in the details.

And this routine accounting practice means that charities with incentives to be frugal are generally free to break the bank for special occasions.

[…]

Here’s the bottom line: While galas don’t automatically signal wasteful spending, you can’t count on the authorities or other experts to call it out when they do.

I had never really thought about the fundraising overhead ratio in this light before. On top of that, if some of the items in the swag bag was donated, the charity makes more money, thereby lowering the ratio even further. The donor still can only claim a $100 deduction because the fair market value of the contents are still $900.

While I opened this post using the term “deductibility rules allow,” the article authors characterize the rules as incentivizing large gala fundraisers.  So when the conversation comes up questioning why people hold these fundraisers when they rarely make money, it might be worth acknowledging that the way the accounting is handled allows non-profits to throw a big party and not suffer under the disapproving gaze of watchdog reporting.

The article also acknowledges that many charities are foregoing large charity events in favor of No-Go Galas where you donate the amount you would have spent getting dressed up and attending. In this way there is even less of a cost to the charity.  Basically it is asking for a donation with added context to encourage you to give more than you might to an annual appeal

Looking To The Countryside

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As a person who has lived and worked in rural locations, I read an article about the Catskill Mountain Foundation (CMF) on the Inside Philanthropy site with great interest.  I thought some of the observations made in the piece were valuable both for funders who might be reluctant to fund rural organizations, and for organizations who were rallying support for creative placemaking and related endeavors in rural locations.

Writing for Inside Philanthropy, Mike Scutari suggests that some of the assumptions funders have about getting the most bang for their buck by supporting programs based in urban locales might not be entirely accurate.

Scan Inside Philanthropy’s archives and you’ll find examples of huge urban philanthropy efforts whose return on investment is murky at best. Most recently, David Callahan wrote that despite an influx of $1 billion from the Charles Stewart Mott Foundation to Flint, Michigan, life has mostly become worse in the city over the past half-century.

Finn’s smaller-is-more-impactful approach flips conventional wisdom on its head: Funders can move the dial more effectively by operating in more concentrated communities.

CMF Founder Peter Finn identified four challenges that particularly face rural organizations in addition to the perennial general concerns about the shrinking pool of available funding.

First, a feeling among some locals that change is not welcome. It’s an idea we sometimes see in urban creative placemaking, where some longtime residents can view arts organizations as interlopers and gentrifiers. Finn’s experience suggests that rural organizations aren’t immune from this perception. “The Catskill Mountain Foundation encountered this at times during the past 20 years,” Finn noted, “but seems to have finally gotten beyond this.”

Second, attracting sustained participation from the local community….

Third, finding talented staff. “We have been lucky that we were able to hire several excellent staff members…But in rural communities, the pool of talent to select from is limited.”

And lastly, the perennial specter of donor fatigue. “It is relatively easy to attract money in the early years for an energetic new arts organization that seems to be on path to success. All organizations encounter bumps in the road, and some donors are lost in this process. There has to be a core of key donors committed to sticking with the mission for the organization to become both successful and sustainable.”

Some of these points probably aren’t groundbreaking revelations. Still, it takes living in a rural community to appreciate the particular nuances of some of these points. I included the entire quote about CMF encountering resistance to change over 20 years because acceptance of the new tends to be a lot faster in urban environments. In many places rural locations you are considered a newcomer if you haven’t been around for about 50 years. I don’t doubt that some people may have finally warmed to them after 20 years.

Small Glint Of Hope In The Overhead Cost Conversation

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I have to give Brad Shear of the Facebook group Non-Profit Happy Hour a significant tip of the hat for calling attention some interesting information about the non-profit starvation cycle buried in a Harvard Business Review piece about Business Management needing the influence of philosophers. I would likely not have read the piece long enough to come across the information.

Briefly, the non-profit starvation cycle is characterized by grant makers funding a program but only allowing a small portion of the money to be used for the overhead costs necessary to execute the program.

In the HBR article, authors Roger Martin and Tony Golsby Smith discuss a scenario they ran into regarding assumptions being made  about donors and foundations.

The consulting firm accepted this framing of the problem and believed that the strategic challenge was figuring out how to persuade donors to increase the percentage allocated to indirect costs. It was considered a given that donors perceived indirect costs to be a necessary evil that diverted resources away from end beneficiaries.

We got the firm’s partners to test that belief by listening to what donors said about costs rather than selling donors a story about the need to raise reimbursement rates. What the partners heard surprised them. Far from being blind to the starvation cycle, donors hated it and understood their own role in causing it. The problem was that they didn’t trust their grantees to manage indirect costs. Once the partners were liberated from their false belief, they soon came up with a wide range of process-oriented solutions that could help nonprofits build their competence at cost management and earn their donors’ confidence.

This is the first time I ever read that donors acknowledged the problem and their role in perpetuating it. That was cause for optimism.

I disliked reading that there such a level of distrust that the grantees would manage costs well. I would venture to say that insufficient funding contributed to a situation where organizational staff members were filling too many roles to properly focus on cost management. Though I don’t doubt that some organizations needed to improve practices regardless of staffing levels.

I am curious to know about what the process-oriented solutions were and if they required significantly more effort or if the solutions helped the organizations manage their costs more efficiently while roughly investing the same effort.  Probably more importantly, were the solutions indeed successful at earning a higher level of trust and funding from the donors?

 

How Quickly Things Progress

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If you want some evidence about how quickly new technologies and methods of doing business are having an impact on our lives, check this out:

In May 2009 I wrote about the potential legal consequences of posting solicitations for project investors online.  It just so happens that Kickstarter was founded a month before, April 2009, but it hadn’t really started to have a noticeable presence.

October 2011 I started writing about legislation and rule changes starting to take place that would remove many of the previous limits that limited giving to Kickstarter type campaigns to donation status rather than allowing investment with an expectation of return.

By December 2011, people were talking about this as a potential funding model for productions with Off-Broadway show or smaller budgets.  A short time later, people were writing that some of the limitations may not be conducive to those type of project.

I am not sure where things stand at this time. I know the laws have continued to evolve. In 2015 Broadway producer Ken Davenport wrote about how recent regulation changes would have made the crowdfunding effort he engaged in for 2012 Broadway production of Godspell a lot easier. At the time he claimed, “Yep, my friends, for-profit crowdfunding is here.”

This might be a funding model people would want to look into for future projects.

While it didn’t seem like it unfolded that quickly at the time, looking back I am surprised as how quickly things transitioned from the founding of a crowdfunding platform to the establishment of a critical mass that made authorization of new avenues of investment important. (Though granted, anything that facilitates the flow of money for investment is going to be prioritized in the US)

 

For- & Non-Profit Difference Is In Relations, Not Good Intentions

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Last month, Non-Profit Quarterly reprinted a piece by Paul Hogan that explored the basic differences between for- and non-profit organizations that are not clearly understood and often lead to the “should be run like a business” statements.

Hogan says that companies that focus on the well-being of their employees and are dedicated to stewardship of the environment and other causes still have more in common with other for-profits than non-profits, despite their worthy intentions.

Higher fixed costs lead to lower net profits. But consider that in this way, the profits aren’t lost at all: They are simply allocated differently, to the greater benefit of employees or the community in which the business operates. Regardless, the for-profit enterprise still is fundamentally extractive, transactional, and profit-driven.

In comparison,

Nonprofit enterprises, on the other hand, are relational and restorative, or generative. The basis of activity in the nonprofit enterprise is personal and interactive, and seeks to restore or help generate whatever people need to improve their lives, or the life of the community in which they live.

[…]

It could be argued that even this exchange is transactional, no different from a for-profit interaction. But there is a critical difference: The person to whom the service is being provided is not usually the source of the payment for the service. I don’t pay my doctor or my dentist or my phlebotomist. Someone else does, and generally, I have no idea what amount is actually paid. So, the nonprofit person-to-person interaction is not zero-sum or about money or profit at all; it’s about the relationship that is established. And it is this disconnect of the cost of service from the third-party reimbursement for that service that destabilizes the nonprofit sector in ways that the for-profit sector does not deal with or need to understand.

And specifically in relation to the arts:

This isn’t restricted to healthcare or human services, either. The amount you pay for a ticket to many of the arts organizations you attend is subsidized, sometimes heavily, by outside public or private funders. If most arts organizations had to charge the full amount they needed in order to operate, most of us wouldn’t be able to afford to attend. That’s important because the health of people and communities depends as much on arts and culture as it does on all other nonprofit work, and arts must be as accessible as healthcare and education.

I apologize for the long series of quotes from the article, but I wanted to highlight his logic in contrasting for- and non-profit businesses and how he related insurance payments with fundraising.

I was especially interested in the way he compared insurance payments by a third party with third party funding of the arts (or any non-profit org). The idea that you need insurance because you might not otherwise be able to pay a medical bill is widely understood. That context provides a smoother segue to discussing why most of those non-profits serve couldn’t afford access to the services provided without a third party subsidizing their operations.

Of course, health insurance and healthcare costs being a hot button issue, you have to quickly insert assurances that there pretty much aren’t any heavily inflated costs related to the work you are doing.

Ever Think About How Many Staff You Need Per Attendee?

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Last week the National Center for Arts Research (NCAR) released some interesting data about the ratio between the number of full time employees at arts organizations and the audiences/visitors they serve.

An average of 3,547 people attend for each full-time employee. That is the relationship between an overall average of 38,741 attendees and 11 full-time staff members annually.

Finding that attendance at many organizations has either decreased or is flat, but number of staff has grown NCAR says,

This means that organizational capacity expanded at a slightly faster rate than growth in the number of people served. This does not mean that staffs became bloated. Instead, modest staff expansion can mean that an organization realizes it has maxed out its current staff’s capacity to provide high quality offerings and services, and the ability to attract more future audience members depends on making initial investments in people.

They break down the data by sector, organization size and market size.

Every Answer Raised More Questions

The part that really interested me and left me wanting to know more detail was in the Ecosystem Highlights section where they talk about “What Drives In-person Attendance?” (their emphasis)

• In-person attendance varies by sector and increases with organizational age, square footage, budget size, the number of programmatic offerings, the amount spent directly on programs (emphasizing the importance of findings related to the Investment in Program Index), targeting kids or Asian-Americans, and having higher levels of local funding.
• Attendance tends to be lower when organizations receive higher levels of support from state or federal agencies, when their lowest ticket prices is not terribly low (representing the importance of an accessible price point), if they produce proportionally more world premieres, or if they target young adults, African-Americans or Hispanics/Latino

Bearing in mind that correlation doesn’t equal causation, I really wanted to know more about the relationship of attendance increasing when programming targeted Asian-Americans or when there was higher levels of local funding.

Does the fact that attendance is lower when there is higher levels of support from state and federal agencies have any significance? Does that say something about the value of NEA funding? Are there restrictions on federal and state support that don’t exist with local funding that leads organizations to program and promote in ways that don’t connect with the local community?

This could be the case since NCAR found,

The number of world and national premieres increased contributions from trustees and other individual donors but decreased government contributions and program and earned revenue.

and

Government Grant Activity has a positive effect on fulltime employees, program expenses and total expenses but a negative effect on the number of offerings and direct marketing expenses.

So maybe federal funders aren’t really supporting the new work, broader programming and marketing that is needed to engage larger audiences.

I started to assume local funding meant high giving from individual donors until I read (my emphasis),

Physical attendance is lower in communities where the total population is larger, there is a higher percentage of children in the community, and the community’s overall level of philanthropy is high.

So I guess higher levels of local funding associated with higher attendance must be either local foundations or government?  Except, apparently federal funding is helpful except when it comes to securing money from foundations:

The receipt of an NEA or IMLS grants had a positive effect on nearly all outcomes except foundation funding, which was lower for federal grant recipients.

Some Surprises About Demographics Orgs Want

Why is attendance lower for young adults, African-Americans and Hispanics/Latinos? Is it something about those segments or are arts and cultural organizations as a general group doing things that don’t resonate well with those groups but do resonate with kids and Asian-Americans? (Keeping in mind we aren’t necessarily talking about the same organizations doing well with the latter groups but not the former.)

There seems to be an inverse relationship on these same factors when it comes to Full Time Employees.

• Organizations that target people under 25 years old or Hispanics/Latinos, and those awarded NEA or IMLS grants tend to have more full-time employees.
• The number of full-time employees tends to be lower for organizations that present higher levels of local and world premieres and for those who target Asian-Americans.

I wondered if organizations that targeted young adults and Hispanic/Latinos also got more federal grants. Since young adults and Hispanic/Latino audiences are often mentioned as groups arts organizations aspire to attract, this might mean these efforts are targeted to receive more federal funding. There is a suggestion this might be the case:

And Government Grant Activity has no effect on program or earned revenue and a negative effect on physical attendance and engagement; this negative effect may reflect government support for arts and culture organizations that are initiating outreach efforts targeting traditionally underserved populations.

Is there an implication of racism/classism in the suggestion that government grants have a negative effect on physical attendance because the grants support targeting underserved populations?

Knowing that organizations that target Asian-Americans have smaller staffs and that organizations that target Asian-Americans have higher attendance, does that mean Asian-Americans are easier to attract? Or are these statistics just a result of there being only a few small organizations specifically targeting Asian-Americans and they are doing a good job with that demographic segment?

Among the interesting pattern NCAR noted in regard to organizations focused on serving minority populations:

Organizations that target African-Americans attract higher levels of contributed funds but tend to have a smaller footprint, with fewer offerings and lower marketing and development expenses and lower program revenue, attendance, and engagement.

Organizations that target Hispanics/Latinos have higher contributed revenue, program salaries, development expenses, and total offerings but lower marketing expenses, and program and earned revenue.

Other Notes Of Interest

Some other interesting observations that don’t necessarily fit with the aforementioned topics:

Youth Orgs Have It Great Until The Kids Grow Up

And organizations targeting children have lower marketing expenses that yield higher attendance, engagement and program and earned revenue, and higher development expenses that yield lower unrestricted and total contributions. This puzzling finding seems to suggest that parent-contributors have a short-term focus on immediate benefits for their children without necessarily supporting the long-term financial health of the organization.

A Vibrant Arts Community Is Great, Except For Attendance

Total Arts Dollars in the community is positively related with nearly every performance outcome, with physical attendance being a prominent exception; this negative relationship likely reflects the presence of many small arts organizations in a thriving arts and culture community competing for audiences.

The Number of Arts Providers in the community positively impacts program and total expenses and contributions from every source except foundations; there is no effect on program and earned revenue and the impact on attendance and engagement is negative, again suggesting competition for audiences.

A Wealthy Community Is Great, Except For Attendance

Higher socio-economic level is negatively associated with physical attendance and engagement – likely reflecting increased access to other leisure opportunities like travel – and positively associated with program, development, and total expenses and program and earned revenue, reflecting the ability of arts organizations to invest more in the art and charge higher prices.

Just to repeat the old saw about correlation not equaling causation, while these findings are interesting individually one should be careful drawing assumptions and relationships between them.  Even some of the things listed together as having positive outcomes may not necessarily lead to a positive outcome when all present together. (i.e. You won’t necessarily increase attendance by expanding your physical plant, offerings, budget, spending and programming to Asian-American kids in a place with high local funding.)

Not Apologizing For Raising Money

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Looking back in the archives can be really rewarding when it comes to reminding yourself about things you long forgot.

Back in October 2008 Seth Godin  reproduced Sasha Dichter’s Manifesto in Defense of Raising Money which begins “I’m sick of apologizing for being in charge of raising money.”

In the post I made, I quoted Dichter’s thoughts about the fear associated with asking for money,

“…wealth is associated with power, and not having wealth can feel like not having power. So going to someone who has money and saying, “You have the resources, please give some of them to me” doesn’t feel like a conversation between equals.

How about this instead: “You are incredibly good at making money. I’m incredibly good at making change. The change I want to make in the world, unfortunately, does not itself generate much money. But man oh man does it make change. It’s a hugely important change. And what I know about making this change is as good and as important as what you know about making money. So let’s divide and conquer – you keep on making money, I’ll keep on making change. And if you can lend some of your smarts to the change I’m trying to make, well that’s even better. But most of the time, we both keep on doing what we’re best at, and if we keep on working together the world will be a better place.”

Looking back at the original post, I had mentioned the importance of storytelling as a skill. At the time I didn’t pay as much attention to Dichter’s suggestion that the work non-profits do to improve the world is interrelated with the work others do.

Do you really believe that the “real work” is JUST the “programs” you operate? (the school you run; the meals you serve; the vaccines you develop; the patients you treat?) Do you really believe that it ends there? Do you really believe that in today’s world, where change can come from anyone and anywhere, that convincing people and building momentum and excitement and a movement really doesn’t matter?

That can be important to remember when you are thinking that some other group is more worthy of support than your own.

Giving Circles As Next Iteration of Crowdfunding?

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Last week, Non-Profit Quarterly noted that the number of Giving Circles in the US were growing and wondered if this had implications for institutional giving. If you haven’t heard of them before, Giving Circles are usually comprised of a number of individuals in a community who pool their money and collectively make decisions about what causes the circle will support.

Lynn O’Connell, DFW’s grants chairwoman, belongs to four giving circles. She said, “No circle looks or acts like any other. Dues, size, structure, and mission are all a little different. It’s not just about writing a check, but the circles area a major force in helping people learn about philanthropy and about nonprofits.” Further, because giving circles have very little overhead, most of the money raised goes directly to grants.

I want to call attention to two things in this quote. First, low overhead being cited as a benefit. Despite efforts to reduce overhead as a criteria of effectiveness, it remains part of the conversation. The second is a little more promising – the fact that circles are educating people about philanthropy and non-profits. A trend in this direction can be benefit non-profits.

An additional positive perspective: “A previous giving circle study by the University of Nebraska found that people who join giving circles give more, volunteer more, and are more engaged in their communities.”

The financial support that giving circles provide is relatively small scale compared to large established foundations. However, they are apparently growing out of a distrust of donating through mediating entities.

It’s also interesting to contrast the giving circle form as it relates to the trend away from “intermediated” giving, which has weakened general funds in United Ways and community foundations and boosted the use of donor-advised funds. Perhaps this tropism is less about greater individualism and more a “no confidence” vote on past intermediaries.

Something I wondered was if we might see online giving efforts evolve from models like that of Kickstarter where many people give to projects, to virtual giving circles where those of shared interest and giving philosophies might cooperate regardless of geographic separation.

Since wealthier individuals might have more tax incentive to form and give through foundations, it is possible that some Internet based giving circles with thousands of members could emerge as influential in diverse sectors either competing with foundations or providing leadership in new directions. A geographic spread of members might also see giving less concentrated around urban regions.

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