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Embracing The (Cost) Disease

June 19, 2012

by:

Joe Patti

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

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

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

[…]

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

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

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

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

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

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

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

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

Arts in an Age of Technology, Business Models, Leadership

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Info You Can Use: Job Descriptions, Not Everything Is A Critical Duty

June 18, 2012

by:

Joe Patti

Not long ago I came across a job posting for a non-profit organization that listed over 25 duties and marked each one of them as a core responsibility.

Now, my first thought was, if every job responsibility is a core one, why did they go to the trouble of applying a special symbol to each one.

My second thought following soon after was that this is why there is so much burn out in the non-profit field.

Theoretically, a job should only have 4-5 core responsibilities. Every other responsibility should be subsets of the core responsibilities or be something you do occasionally. (Vendor coordinator for the annual street fair, for example.)

Core job responsibilities are ones to which you should expect to devote a large portion of your day/week. If you have 25 core duties and even assuming you work at 10 hour day, you will only be able to devote 24 minutes each day to a duty. If indeed they are all core responsibilities.

If you have a job as a marketing director, your core responsibility might broadly involve promotional efforts, external relations and sales. In pursuit of that your a subset of your responsibilities might be supervising writers, designers, front of house staff, relationships with the boards, vendors and various constituencies. You will have many responsibilities, for certain, but most will be aspects of the core duties and not equal to them.

The ticket office manager’s core responsibility is to supervise the ticket office. If your core responsibility is listed as supervising the ticket office, marketing and publicity people, house manager, then you need to have as much contact time with those people each day as the ticket office manager does with the ticketing staff. Presumably those managers are competent enough that they don’t require such close supervision.

Your job descriptions may be very long in order to clearly define what your duties are. I had an email exchange with Drew McManus regarding this topic and he mentioned he has a history of advocating for detailed job descriptions.

I would probably agree with him. The way some job descriptions are worded, it often isn’t clear what the duties are. There are times I read job postings for executive director positions and I don’t know if the person will be supervising a marketing department or actually writing/designing promotional pieces themselves. With non profit arts organizations, one can never assume…

Now I will confess I understand the impulse to make everything a core responsibility. When you have so few people working for your organization, it is crucial that so many things be accomplished and you want to underscore for the job applicant—-it is IMPORTANT to our operations that these duties are successfully implemented.

(I will also confess this topic is something of a sore point with me since 90% my own job description is boiler plate putting “performing arts management” in place of the “facilities operations and management” hire the week before.)

But some things are more important than others and people need to know what the overriding priorities of their position are. The resources and personnel of the marketing department may be necessary to support fund raising campaigns and outreach programs in addition to promoting events.

Determining which of these functions receives the most priority will depend on a number of factors, but the marketing director’s position description should provide a basis for that decision. If the reality does not match the position description, it may be worth examining that fact during a performance review.

But that is a different entry altogether.

General Musings, Info You Can Use, Leadership

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Thus Rises The Individual Curator and Commissioner

June 13, 2012

by:

Joe Patti

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

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

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

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

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

Projects like these have three big requirements.

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

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

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

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

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

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

Arts in an Age of Technology, Audience Relations, Business Models, creativity, Fundraising, Marketing/PR, New Initiatives

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Info You Can Use: Doing Business With Board Members

June 12, 2012

by:

Joe Patti

Since I am on the topic of board decisions this week, Non Profit Law blog recently listed a link about non profits doing business with their own board members.

While it is natural for non profits to seek out people from specific professions/skillsets to be on their boards in order to provide some expert guidance and advice, things get a little sticky when it becomes necessarily to contract professional services.

Since board members often have a personal investment in the organization, they may tend to charge extremely competitive fees for their services. As the article notes, it can also be a little awkward to be talking about paying someone else to do work that a board member in the room is perfectly capable of performing.

The article notes that not only is it difficult to avoid having some business dealings with your board members, it may be hard to actually get good people to serve on the board if they perceive there will be undue scrutiny of how their professional and volunteer activities overlap.

However, it is important to have a conflict of interest policy for board service. Failing to have one and follow it create potential problems for the organization, especially given the role non-profits serve in their communities.

Experts say one danger of so many veteran board members is that a nonprofit could lose touch with how a community perceives the awarding of contracts to members of its own board.

“Public legitimacy and support are very important, and a more isolated board may not be as aware of that,” said Francie Ostrower…

[…]

Board Source , an organization for nonprofit boards recommended by the National YMCA, suggests that board members who want to do work for the organization should donate their services. If they can’t, they should follow the board’s conflict policies.

Other critics of the practice such as Joshua Humphreys, a fellow at Tellus Institute, a Boston policy think tank, take a dimmer view.

“Best practice for nonprofits is to draw a bright line between board service and doing business with service providers,” said Humphreys. “It creates divided loyalties between the public purpose of the charity and the private gains someone is motivated by.”

Siegel (Jack Siegel, Charity Governance) said the practice chips away at the independent thinking of board members who are the recipients of contracts, as they tend to side with their supporters on the board in other matters.

“If you see conflict (of interest), you can almost bet there are other problems in the organization,” Siegel said.

The article goes on to quote Siegel pointing out that it is difficult to hold the work of board members to the standard you should because you have a relationship with them. This point struck a sympathetic chord with me as I remembered some occasions in my career where the quality of the work by a board member was never in question, but changes to elements no one really liked were never requested for fear of offending the board member by questioning their style/taste.

One of the suggestions for eliminating the conflict is that the person leave the board for the duration of their company’s contract under the assumption that if the person is really invested in the success of the organization, they will extend the same discounts as they would when they were serving.

What the article doesn’t mention is that if they don’t extend the same discount it may actually be better for your relationship with the person. If all those involved feel that a fair market price is being paid for the work, there is less potential for resentment on the part of the service provider over sacrificing time and income on a difficult project and less hesitation on the part of the non-profit to assert that their standards be met.

Still, this is all easy to say in theory. In practice, you run into the old question, “how do you fire a volunteer?” When people generously provide time, energy and expertise, they are investing a lot of themselves personally. It can be difficult to refuse their help without making it seem like you are refusing them as a person.

That is why it is good to have a well-constructed conflict of interest policy to which to point. When the situation arises where a board member will start to do business with the organization in a significant way, you can point to the policy and note that providing the service will, of necessity, change the board member’s relationship with the organization and as such the following actions must be taken per the conflict of interest policy.

Board Source has some general information on conflicts of interest on their website and some samples conflict of interest statements for purchase and download. (I have never read them so I can’t attest to their usefulness.)

Boards, Info You Can Use, Leadership, Legal Topics, Management Philosophy

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